Both schemes have been categorized as "share-farming" interest scheme by Securities Commission of Malaysia, yet, both were in the limelight lately due to their contradict directions. The old one (Country Heights Growers Scheme) is wooing investors to terminate it, while the new one (Golden Agro Growers Scheme) is wooing investors to invest.
Why CHGS was in HOT water?CHGS was the 1st oil palm plantation investment scheme in Malaysia. Launched in 2007, it guaranteed a 8% return annually for first 3 years, and subsequently it is projected to distribute the returns of over 11% per year throughout a period of 20 years. However, voluntary early termination of the scheme was proposed recently, citing that CHGS was unable to reach its full potential because of poor fresh fruit bunches (FFB) yield. Various factors were given such as unpredictable weather conditions, incursions of wild elephants into the estate, poor soil fertility, shortage of key personnel and manual workers, and uncompromising terrain.
How Good is GAGS?
On the other hand, the new GAGS guaranteed 7% return yearly for first 5 years. Subsequently, investors will enjoy 100% of the net profit of the plantation until 20 years maturity. Investors were told that margins associated with the palm oil industry have always been good traditionally. So, in the event of falling CPO prices, it still can make money if the estate was managed well and efficiently. A mill was also planned to be set up in 4 to 5 years to avoid uncertainties of refusal by external millers.
Are they related?
Although Finance Malaysia opines that both schemes were not related, but the timing of it is somewhat makes us curious. Is it really so coincidence? It was like giving the existing investors of CHGS the chance to switch over their investments to GAGS. Both schemes are very much similar, but with different people managing them which is the key determining factors for its success or failure. Anyway, Finance Malaysia doubt the success of the new GAGS which don't have proven track record and was planted in Sarawak where peat soil may increase the cost of planting. The problems faced by CHGS may reoccurred on GAGS in the future. Estate management plays an important part in such scheme.