LEADING rubberwood furniture manufacturer, Sand Nisko Capital Bhd (formerly Len Cheong Holding Bhd) expects to return to profitability in its FY2021 – led by its recently commenced plantation logs business in Kelantan which can potentially enable the company to reap revenue averaging above of RM10 mil annually.
In January 2021, SNC’s wholly-owned subsidiary, Len Cheong Industries Sdn Bhd has entered into a joint-venture agreement with Integrated Biogranix Ventures Sdn Bhd to harvest existing secondary forest logs on the permanent forest reserves in Kelantan measuring about 5,434 hectares (13,445 acres).
LCI is entitled for 30% of net profit under the terms of the abovementioned agreement.
“The group has been busy in setting up the infrastructure, logistics and the relevant license arrangement since the first quarter of this year, and we envisaged that the operations would be able to commence in 2021,” Sand Nisko’s managing director Emily Sow Mei Chet pointed out.
“The species mix of trees in the area is about 65% hard wood species approximately (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 1,500-2,000 acres before end-FY2022 prior to commencing the cultivation of the Eucalyptus species.”
Based on the selling price of wood – all the logs harvested will be sold to domestic downstream players to produce sawn timber – the harvesting of existing forest logs will keep Sand Nisko busy for the next five years.
This augurs well for the group’s strategy to turnaround in the upcoming years. However, the targeted time frame may be subject to some uncertainties due to the current COVID-19 pandemic restrictions.
Upon completion of the harvesting of the secondary forest trees, both parties will also cultivate, terrace, plant and harvest trees of the Eucalyptus species and/or engage in agroforestry on the land.
LCI is entitled to 70% of the net profit under the terms of this agreement.
The harvested Eucalyptus trees will be sold to companies involved in the production of plywood.
It is estimated that around 700 eucalyptus trees can be cultivated on a one-acre land with each tree can be sold for RM250 after it reaches maturity in the fifth year.
Upon cultivation of the entire 13,445 acres of land and based on 75% of survival rate of the trees, the project can potentially generate a revenue of RM1.7 bil with a net profit margin of around 20%, according to Sow.
“As a responsible company, we are conscious of our carbon footprint, thus this project is aimed at bringing our nature back, restoring balance between profitability and forest restoration,” she enthused.
“Eucalyptus is an effective tree for forest restoration due to its rapid growth and adaptability to the environment. This highly profitable tree species is capable of tolerating severe periodic mentoncarbon moisture stress, low soil fertility and even damages from fire and insects.”
At 3.03pm, Sand Nisko was up 1.5 sen or 2.56% to 60 sen with 1.01 million shares traded, thus valuing the company at RM62 mil. – May 17, 2021