Swee Joo Berhad - To gain from palm oil

Swee Joo Bhd's recent entry into palm oil transportation is expected to give it a revenue boost, thanks to the bullish outlook for crude palm oil (CPO).

The Sarawak shipper's future in transporting palm oil from east Malaysia to various parts of the region “remains bright” on rising demand for the commodity, MIMB Investment Bank said in its strategy report for 2008.

MIMB, which has a “buy” call on the counter, estimates “liquid transportation” contributing about 9% to Swee Joo's revenue from the financial year ending Sept 30.

It said with limited available land in Peninsular Malaysia, it was the Government's plan to tap sizeable land in east Malaysia to plant oil palm, making the two states important palm oil producers in the near future.

At present, Sarawak had developed some 600,000ha of new oil palm estates, which were at various stages of maturity, it said.

Already, Sarawak is now the fourth largest state by area planted with oil palm, with the State Government aiming for one million hectares in the next few years.

Also, the Government expects the country's CPO production to reach 20 million tonnes by 2020 from 15.88 tonnes in 2006.

“This is expected to be driven by the increasing contribution from east Malaysia,” thus boding well for Swee Joo, MIMB added.

The company will begin its venture in palm oil transportation with two tankers of 7,000-tonne capacity each, the first of which Asia Star was delivered last August.

The second, Asia Bright, is expected to be delivered within the first quarter this year. Asia Success, the third tanker with 12,700-tonne capacity worth US$22.1mil, was ordered from China in December with expected delivery in June.