Sand Nisko targets profitability via plantation logs business

by NUR HAZIQAH A MALEK / graphic by MZUKRI MOHAMAD

SAND Nisko Capital Bhd (SNC) expects to return to profitability in the financial year ending Dec 31, 2021 (FY21), led by its recently commenced plantation logs business in Kelantan.

SNC MD Emily Sow Mei Chet said the rubberwood furniture manufacturer has been busy setting up the infrastructure, logistics and relevant licence since the first quarter of the year.

She said the operations are expected to commence in 2021.

“The species mix of trees in the area is about 65% hardwood species (40% meranti, 25% combination of keruing, kempas, kelat) with the remaining 35% being a mix of medium and light wood.

“Our goal is to finish harvesting at least 1,500 to 2,000 acres (809.4ha) before the end of FY22, before starting the cultivation of the eucalyptus species,” Emily said in a statement yesterday.

In January 2021, SNC’s wholly-owned subsidiary Len Cheong Industries Sdn Bhd (LCI) entered a joint-venture agreement with Integrated Biogranix Ventures Sdn Bhd to harvest existing secondary forest logs from the permanent forest reserves in Kelantan covering an area of 5,434ha or 13,445 acres.

It is also entitled to 30% of net profits under the terms of the agreement.

The group targets its revenue to average above RM10 million annually based on the selling price of wood; all the logs harvested will be sold to domestic downstream players to produce sawn timber and harvest existing forest logs for the next five years.

After the harvesting of secondary forest trees is complete, the group said both parties would cultivate, terrace, plant and harvest trees of the eucalyptus species and engage in agroforestry on the land.

LCI is entitled to 70% of the net profits under this agreement. The harvested eucalyptus trees would be sold to companies involved in plywood production.

SNC estimated that around 700 eucalyptus trees can be cultivated on one acre of land and can be sold for RM250 each after reaching maturity in the fifth year.

Emily said upon the cultivation of the entire 13,445 acres of land and based on 75% survival rate of the trees, it would generate a revenue of RM1.7 billion with a net profit margin of around 20%.

The group is conscious of the carbon footprint of its businesses and the project is aimed at bringing nature back, restoring a balance between profitability and forest restoration.

She said eucalyptus is an effective tree for forest restoration due to its rapid growth and adaptability to the environment due to its capability of tolerating severe periodic moisture stress, low soil fertility and damages from fire and insects.

In February 2021, Minister of Plantation Industries and Commodities Datuk Dr Mohd Khairuddin Aman Razali said Malaysia’s export of timber and its products could reach RM23 billion for the year following the rollout of vaccines.

He said the economic recovery in major timber importing countries such as the US and China and increasing demand from other countries would drive the wood industry to remain positive throughout 2021.

SNC recently expanded its property development business after acquiring 25.9 acres of land in Melaka for RM5.8 million.

Its wholly-owned unit Len Cheong Resources Sdn Bhd entered a sale and purchase agreement with Cempakaraya Sdn Bhd for the freehold land held under GRN 9505 Lot 68, Mukim of Lendu, district of Alor Gajah, Melaka.

Emily said the group had already diversified into property development, construction and property investment since last year and the latest acquisition could help propel the group’s advancement into the business.

The land acquisition would mark the group’s turnaround, which has seen its furniture manufacturing and trading division struggle during the pandemic.

In the past month, the group’s share price has risen from 41 sen on April 19 and peaked at 65 sen on April 26.

The share price gained 5.13%, or three sen to 62 sen yesterday, valuing the company at RM64 million.