Mega First Corporation Berhad (MFCB) Earnings Call Transcript & Summary

Hi, again, good afternoon, everyone, and welcome to the Quarter 3 Mega First briefing. My name is [ John Huo ], and I'm from Broker Insights. I'd like to introduce to you, Rondy Yunanda from Stockbit, who will be co-hosting with me. Hi Rondy.

Hi, everyone. Hopefully, everyone can hear us okay, without echo and stuff.

Yes, if you can hear us loud and clear in the Q&A, can you give us a 1 or in the message blocks, just typing in that you can hear us loud and clear. If not then we will be trying to adjust the settings to make sure there's no echo. And obviously, the start of the show, none other than Mr. Yeow [indiscernible]. Thank you so much for spending time with us.

Good to be here.

Okay. All right. Without further ado, I'll let Mr. Yeow -- usually, for those of you first time us here, how we normally conduct this session is Mr. Yeow himself will be presenting a short presentation about the various aspects of the business, the various operating units. And once that presentation is over, the floor is open for Q&A. And normally, what Rondy and myself will do is we'll try to curate the questions based on the different business units. So keep the questions coming and we just bear with us, be patient when we cover -- let's say, if we cover the oleochemical business or we cover the renewable energy. We will try to finish off all those questions within that business segment before moving on to the next segment, right? For those of you first time here, welcome for those of you who've been here many, many times, I'm glad to have you back. And without further ado, I will let the floor for Mr. Yeow, and I'm going to show you this -- okay, Mr. Yeow, the floor is yours.

All right. Thank you. Thank you, John. Okay. Like in the past briefings, the format, I will follow the same format as before. We will go through the 3 agenda, rather 2 agenda, the third one I'll basically leave it for the audience to read it. Anyway, the slides have already been uploaded in Mega First website. You can have a copy of that by going to our website and download a copy. Okay. All right. The third quarter 2024, our revenue was up 16.1%. Our core PBT was up almost 10% to MYR 252 million mainly because of better contributions from our RE and resources side, partially offset by decline in packaging. But on the group level, the PBT came down by 3.6%, mainly because of higher ForEx losses amounted to MYR 18.4 million during the quarter versus a small gain in the corresponding quarter last year and also higher share of associate losses, partially offset by a MYR 7.3 million insurance claim income recognized during the quarter. As everyone knows, the ringgit appreciated sharply in the third quarter, rising from USD 4.72 to USD 4.12 as of 30th September. That resulted in a fair bit of revaluation -- translation losses on U.S. financial assets and liabilities at the end of the quarter. On Edenor, the capacity issues continue to plague the earnings and we ask -- we have -- unfortunately, it took longer than expected to stabilize the plant. The plant was a very old plant. And we initially thought we can do it within 2 to 3 years that has been slightly delayed. Nonetheless, we expect we are at the tail end of the certification work 2025 should be a much better year, fingers crossed, all right? In terms of PATAMI or rather PATNCI, it rose 13.8% to MYR 117 million, mainly boosted by the impact of our additional acquisition of DSPC stake, raising our effective from 80% to 95%. Okay. As in the past, I have also provided here what I consider as normalized profit before tax is essentially to strip up noncore items and one-off items. So this would include a share of profit from JV/associate, some fair value loss on option liability, any ForEx gain or loss on capital transactions, anything to do with trade transactions like trade receivables, trade payables, cash balances, these are included in normalized profit. I only excluded the capital transaction ForEx effects. And of course, fire insurance claim inventory written off. This inventory written off is accounting policy change. That's why I put it in here relating to our land under development in [indiscernible] and also tax penalties because of the tax legal issue with PJ8 Idaman Harmoni. So despite strong earnings from core division, our 3Q normalized PBT fell 5.7% and again, that is because of the ForEx loss that I explained earlier, of MYR 18.4 million versus a MYR 0.9 million ForEx in third quarter 2023. Cumulatively for 9 months, normalized PBT rose 1.1% to MYR 365 million. The pace of growth is weighed down by the again ForEx losses, which after excluding minority interest, the impact of ForEx loss at PBT level is MYR 14.9 million. versus MYR 6.8 million ForEx in 9 months 2023. Sorry, this is PBT level, all right? So this one is inclusive of MI. The next slide is the one that is excluding MI so I've also showed you the normalized PATNCI. And as you can see, third quarter normalized PATNCI rose 13% despite higher ForEx losses, mainly because of increase in effective interest in Don Sahong, 9-month normalized PATNCI grew 16.4% and despite a MYR 13 million -- MYR 13.6 million ForEx losses in the 9-month period versus MYR 6.8 million gain. So in other words, if not because of the ForEx losses, our earnings would have risen at a faster rate. Okay. Going by division. I think this one is -- can be easily explained. Revenue is up 12% mainly because of hydro energy sales. In terms of energy volume, it was up 18.5% to 664 gigawatt hour, mainly because of the fifth turbine addition. Average tariff, however, came down 3.1% because of the lower tariff rate for the fifth turbine while the PPA and CA is still being negotiated -- not negotiated, are still being finalized, all right? So that resulted in ringgit tariff of MYR 0.2733 versus MYR 0.2092 in the period last year in the same period last year. There's not much growth in the solar side in terms of capacity generation. PBT overall rose 6.4% to MYR 131 million. mainly because of higher revenue, which is partially offset by higher O&M expenses for all the 5 turbines and also higher interest expense as a result of additional loans taken to fund the acquisition of 20% stack in DSPC. All right. As before, we show you the Pakse level and the corresponding capacity factor. You can see that the capacity factor this year after the introduction of the fifth turbine over on average below the EAF of 4 turbines in the previous year is because of the additional capacity. So it has got more turbines spread out, plus this year, we also witnessed exceptionally wet season, that raises the water level to too high levels such that there's too little water hit to generate sufficient power. So the EAF kind of like dropped on average in the third quarter. Nonetheless, we are still up total revenue by total energy volume by 18.5%, as mentioned earlier. Okay. On resources, revenue was up 25% to MYR 60.3 million, mainly because of higher sales volume both Malaysian market and regional market demand remains robust. The growth rate is also accentuated by a low base in 2023 because last year, we had a major plant shutdown by a major customer. PBT was up 147% to MYR 13.6 million, mainly because of higher revenue, productivity improvements and favorable shift in the sales mix. There is -- as I explained in the past, there was an increasing catch-up in terms of price adjustments to offset the escalating costs. So that we have already caught up since the second half of 2023. And therefore, this year 2024, you see the full effect of the margin improvement. All right. Packaging is -- it's been a tough quarter. Revenue was flat despite the operating, challenging operating environment characterized by weak consumer demand and excess industry capacities. Because of this intense competition, PBT slipped 25.7% to MYR 7.5 million as we faced margin pressure from price competition and also a stronger ringgit, which eroded our export competitiveness. Okay. Balance sheet review. You can see a lot of translation losses because of the strengthening of ringgit other than the translation loss and the usual movement, I think what is worth highlighting is the PPE, you see a big addition there because we have transferred the cost of the fifth turbine to PPE for now, but this will be retransferred out to service concession asset after the signing of the new CA and PPA, all right? Investment property, there was a big addition because we bought 688 acres of land in Para state for MYR 75.4 million to develop our CGPP solar project and also future greenhouse projects for food security division. We have also bought -- there's also some effect from the consolidation of CSC, which we acquired in June. That accounted for MYR 24 million addition. Other than that -- so development expenditure correspondingly reduced because we have transferred it to PPE. What is left there, MYR 20.2 million is the development expenditure for our Maldives solar project. Receivable has also come off. We are getting paid more by EDL now. So receivable is coming down quite nicely. But all this will be resolved. The long outstanding receivable from EDL will be resolved together with the signing of the CA and PPA where the long outstanding portion will be restructured out, carved out to become a term loan, secured against payment from EDC. So we don't have to worry about that. All right. Cash flow, we generated MYR 459 million from operating activities, which is an increase from MYR 431 million in the same period last year. We have spent almost MYR 300 million in the first 9 months on investing activities, which I'll give you the breakdown later. And together with dividends and finance costs paid, we generated a net cash inflow of MYR 74.4 million, which helped to reduce the net debt position of the group. Okay. So out of the almost MYR 300 million of capital deployed MYR 112 million is for renewable energy, mainly the fifth turbine and some solar. There's very little on resources, packaging took up MYR 80.7 million. That's mainly for the construction of the 2 factories, 1 in Stenta, 1 in Hexachase. There's some investment in food security as we continue to develop the farm in Mondulkiri, plus the development of farm in CSC as well. Now you will notice others, there's a big chunk of MYR 87.3 million. That is mainly for the land acquisition that we did, the 688 acres that I mentioned earlier. Okay, gearing position improves this quarter because of the additional net cash flowing into the group. So today, the net debt-to-equity ratio is 10.3% or a net debt amount of MYR 331 million. All right. Edenor continue to make losses. I'll discuss a little bit on Edenor at the prospect station, okay? Our share of loss from Edenor was MYR 6.9 million in the third quarter. Okay. On the CA and PPA, it has just been approved by the National Assembly Standing Committee of Lao on 20th November, okay? So that is the most critical approval. And once this approval is done, the National Assembly will instruct the relevant government agencies to execute whatever agreement that needs to be executed, including the PPA and the CA. It will also involve the restructuring of the long-term receivable and also involve the securitization of the water rights, right, where we will be spending upfront around USD 100 million to secure the future payment of royalties to the Lao government. Okay, we expect, again, in fact, our team is now in Lao to try to expedite the execution of all the agreements. So we should be able to complete it by 31st December before the new COD date starts on the first of January 2025. Prospects. Just to recap, if you look at the first 9 months, our normalized profit went up 16.4% to MYR 333 million. So I think we are on target to achieve at least MYR 450 million to MYR 460 million on normalized PATNCI. Okay. We expect fourth quarter to continue to grow in the same momentum. And if you look at the ringgit, since peaking MYR 4.12 as of end of 30th September, it has given up some of the gains and which imply that the ForEx loss in the fourth quarter -- I mean, the ForEx loss for the full year will be less than what we recorded in the first 9 months, which is MYR 14.9 million because we are expected to record some ForEx gain in the fourth quarter reducing the MYR 14.9 million that we recorded in the first 9 months. Okay, on capital deployed -- capital commitment, this one includes both approved and non-approved -- I mean, not contracted and noncontracted, sorry. All right. Renewable energy will take up MYR 160 million. This will be mainly for the CGPP, which is 100-megawatt and the Maldive projects. Then you have packaging that is mainly for the installation of equipment. The first expansion production line is both Stenta and Hexachase. The rest are pretty small. There's a MYR 40 million there. I believe this one is for the acquisition of 30% stake in the Switchgear company, which we do jointly with Pekat Technology. Pekat is taking up 60%. We are taking up 30%. It's a profit guaranteed investment. I think minimum guaranteed is MYR 16 million profit for the company. But so far, they are doing much better than MYR 16 million. So we will be recognizing a share of profit from EP starting from next year, first quarter next year, should be completed by end of this month -- before the end of this month. Okay. On RE side, we expect fourth quarter energy volume to grow around 12%, mainly because -- again, because of the fifth turbine, but we expect revenue to be moderated by lower average hydro tariff, again, because of the fifth turbine at 80% of the tariff rates. And also, we expect some currency translation losses. Just bear in mind last year fourth quarter, the average ringgit to U.S. dollar is MYR 4.685 whereas now is hovering around MYR 4.45. So you are seeing about a 5% depreciation of the currency. So that will weigh a little bit on the revenue side. In PBT terms, we expect it to be relatively flat because higher revenue will be counterbalanced by higher net interest expenses. -- again, because of the additional loan that we took up last year to buy the 20% stake in DSPC. And also after we commissioned a fifth turbine, you will see additional O&M costs and also high amortization cost from the fifth turbine. But because of the effective increase in ownership, you will still see double-digit year-on-year growth on PATNCI earnings to the group from RE division. Outstanding loan is USD 111 million, including the additional loan that we took up of MYR 35 million. So at the current weighted average interest rate of 6.84%, we started up at 7.46% because of the reduction in freight rates, it has come down to 6.84% today. Okay. Solar will continue to grow. We have also tended for LSS5 90-megawatt peak and the results of which should be announced anytime now supposed to be end of this month. So we are talking about over the next 1, 2 days. And well, I was told we are in. So let's see. All right. Before taking into our LSS5, our total capacity has not really changed from the previous quarter. including secured and completed projects, we will reach 420 megawatt. If you secure the LSS5, that will bring us past the 500-megawatt level. Okay. These are just some pictures. On packaging side, we still expect the operating environment to be challenging. You have seen the results of [indiscernible] You've seen the results of Tomypak. You've seen the results of some of the listed packaging companies in Indonesia, in Thailand, they are all suffering from the same reasons, all right, which is global overcapacity and a subdued consumer sentiment, leading to intensified competition within the industry. So we are still expecting margins to be under pressure and further compounded by the fact that our new capacities are coming in. For Stenta fourth quarter we have rolled out 2 new additional LLDPE lines. And for Hexachase, the new printing and extrusion and lamination machine capacity should come on stream by end of first quarter. So this may temporarily dampened the margin a little bit, okay? But on a brighter note, we see the ring giving out some of the recent gains and that should provide some relief for our export sales and also the associated margins. Overall, we are still confident that we will do relatively well in 2025. Okay. This is the latest picture of our new factory in Stenta, which is sitting next to the old factory. And you can see on the right-hand side, these are the 2 new LLDPE blower lines, which have been installed and currently being tested and commissioned. It's not yet been commercially commissioned, but it's still being tested to iron out some trading problems. Okay. This is Melaka side. You can see that the factory is also completed, and equipment should start coming sometime in December or January for installation. Okay. On Resources division, the demand is still healthy. It's just that it's very hard to see where our sales volume would be, because the competitive landscape is keep on changing because of freight rates, because of ForEx rates, we will continue to monitor the situation closely. And hopefully, we will able to continue growth business in 2025. 2024 4th quarter should be okay based on what I've seen so far. Okay. On Edenor, Edenor, we continue to suffer from capacity losses even up to today, although most of the things are fine now, but we are now waiting for our boiler to be repaired. And because the boiler is not yet fully repaired, it will only be fully repaired estimated by mid-December. We are currently operating at suboptimal capacity utilization rate. So therefore, we expect the fourth Q to continue to be in a loss position. And in the last -- in recent months, the challenges are further compounded by the fact that the CPO prices spiked to above MYR 5,000. Most people do not expect coming including ourselves. And if you look at CPKO price, it's quite even beyond MYR 7,000 per tonne. What is the implication of this? The implication is because the market does not expect this spike to be sustainable customers withholding POs and also delayed acceptance of deliveries that they have committed to. So that kind of created a lot of hedging issues, which may result in either derivative gains or losses or either ForEx or in terms of the commodity price fluctuations. So we are still facing that challenge. But what we can do is we will continue to strive for plant stability. So hopefully, when the new boiler is up and running by mid-December, we will be able to stabilize the plant. And that I think is key to make sure that 2025, we will have a reasonable set of earnings coming up from Edenor. Food security division remains very small. But just to highlight, the turnover contribution was MYR 28 million in the first 9 months with a pretax loss of MYR 3.7 million. This pretax loss came not just from CSC farming side, but also from Mondulkiri, which is the Cambodia farm. In the past, we never disclosed that, because the losses is just [ camouflage ] inside the investment holding and others division. But now we kind of like give you an idea where the whole division performance is like. So we don't expect any short-term profit or loss contribution, but we are making improvements as we go along. And we believe that the earnings over the next 5 years could grow substantially from the full security division. Okay. This is actually our greenhouse. You can see this is [indiscernible]. You can see it's very healthy and very sizable. We've tried without washing the vegetables. So just to prove that minimal, if any pesticide is being used. All right. This is, okay, to -- the left is [indiscernible], top left, that's [indiscernible] Top right is [indiscernible], all right? And bottom left is [indiscernible]. That's where our greenhouses, if you can see the top right corner of the bottom left picture, that's our greenhouse area. That's our pilot project, which we now have already built about 10 acres. And the right one is, I think, is [indiscernible], sorry, the one is [indiscernible], other ones mainly Kasturi and [ coconut ]. Okay. I think I'll leave this sustainability update for your own self reading. We have made progress as every quarter, we make some progress. So we always highlighted here, but I think I'll skip that so that we have more time for Q&A. All right.

Yes. Thank you again for the concise but a very good update on the business. So probably, Rondy, do you want to start off with, as usual, the largest of the segment? Yes.

So maybe we will go on to the Q&A on Don Sahong first. Let me take one from the audience. Okay. So this one is from Mr. Neo. He is asking since the new PPA will be finalized soon, will there be a 1% increment in price, which was scheduled on the 1st of October 2024. And secondly, he asked the fifth turbine power selling price is 80% of the current selling price. Is it after adjusted or the original selling price of about MYR 0.0615 per dollar?

Under the current PPA and CA, the 1% increase follows through. So with the effect from first October this year, the tariff was adjusted up from USD 0.0634 to USD 0.064 okay? But for the fifth turbine, the rate would be 80% of MYR 0.064, whereas the power from the 4 original turbines will be at MYR 0.064. So that gives us an effective average tariff at MYR 0.068, I think -- MYR 0.061 or MYR 0.0608, right? You can more or less work backwards based on the ringgit tariff that I've given in the slides. Now come 1st January 2025, all 5 turbines tariff will be reset to a new rate. And I won't go too much detail but I will tell you the concept of this new CA and PPA. In the past, the old CA and PPA, the tariff will rise 1% a year for 10 years. And then it will drop 20% on the USD 0.252 or USD 0.053 in year 11. And from then rise the gain by 1% per annum until the end of the concession period, which is 25 years. Based on that tariff structure, the levelized tariff is MYR 0.0615. The Lao government has requested can you flatten that, all right? So we will be flattening. So the new CA that we will be announcing will have a pretty flat structure but still achieving a levelized rate of MYR 0.0615.

So normal tier going up, coming down.

Yes, yes. But because we have enjoyed 5 years of operational earnings, when you reset, you will obvious inevitably see a decline in the tariff in year 1 of the new concession period, all right? From a year-on-year comparison basis, you say, Oh, my tariff drop. But from a business perspective, we look at it as a big win, because we have literally enjoyed for 5 years of cash flow and now the concession period has been reset to the same period from first October 2025. So if you look at it from a cash flow perspective, it is actually very, very better a lot better than before.

Yes. So can I summarize this, you see whether my understanding is correct? So you enjoyed 5 years for 25 years with a tier up and 11-year tier down. And then 12 year onwards tier up, but now you've flattened it and then it resets for another 25 years. That means you're going to have a 5 plus a 25 which actually means 30 years.

That's right?

Yes.

So what sort of, I guess, savings? I mean, I don't know whether savings is the right word, but on your amortization and depreciation, because it's reset to 25 years, so per annum depreciation will drop.

Yes. okay, because the new CA and PPA has not yet been executed. All the amortization cost is based on the old PPA and CA so even for the fifth turbine that we have started recognizing revenue, this fifth turbine is amortized only over 20 years because the existing PPA will expire 25 years from 2020. Now -- so it means that it's carrying a little bit too much amortization this year, okay? Come 1st January 2025, the -- because the concession has been effectively extended. So the remaining book value at a point in time, which is 31st December 2024 will then be amortized over a longer period of time. So the annual amortization will drop. That will help partly offset the tariff declined on a year-on-year basis.

How much flow to the bottom line is that going to be on just the amortization savings?

Amortization savings should be around -- in ringgit term about MYR 15 million, MYR 16 million per year.

Added to the net profit?

Added to the PBT, yes.

Yes. So with this in mind, I think just to summarize the answer for KL Neil's question is that PPA should be announced everything signed hunky-dory by the 31st, I think it's the mandate.

I'm hopeful. As you know, Lao operates very slowly but the biggest hurdle, which is National Assembly Standing Committee, which is like the parliament, has already issued a decree I've got a copy of the decree and the instruction of the decree is all in relevant ministries and agencies must execute because the parliament has approved.

Understand. So in a way a top-down approach is the top is already -- is more on the mechanics and the mechanism of the...

In fact, the agreements have all been drafted. It's just getting the relevant agencies to stick down, find the time sit down, it's fine. And so we are hoping to sign all together, which may or may not be possible. So if it's not possible, then we will announce piece by piece.

Got you. I think that also solves -- Rondy, that also solves question from an anonymous attendee, Don Sahong when is the contract or new contract is good. I think -- in essence, as Yeow has quite clearly explained the resetting is actually beneficial for the company, yes. Next question with regards to the energy business. I think it's more for the...

Maybe I'll take one first, you get through. Actually, I also want to ask this question when you were explaining this earlier. I think we heard you mention when it comes from the new CA and PPA, which is approved last week, you mentioned there is going to be some restructuring of long-term receivable, and there was a part where this securitization of the water right and how you are going to spend USD 100 million to secure some royalty to the government. And there's also a question from Kai. He just wants to double down on that. Maybe if you can clarify a little bit more, like he mentioned that you also mentioned something about converting outstanding receivable into term loan. Yes. Maybe can you explain how can all this benefit Mega First and what to expect for 2025 on this part when it comes to revenue and profit contribution?

Let me think of what I can say and what I should say. Okay. I hope you don't record this, but -- Okay, if you have been tracking us, you will realize that our receivable is not based on the credit period. The credit period effectively should be only around 2 months, all right? And the -- but the receivable, if you work on the average, which I do disclose in the quarterly announcement is usually about 4 months, 5 months, now even 5 -- up to even 6 months, of course, recently has declined to maybe about 4, 5 months. And the reason for that is because of the OCA -- the OPP arrangement where we build in U.S. dollar, but EDL will pay us 90% in U.S. dollar which is secured against EDC, a payment from EDC. That 10% of the U.S. dollar invoice value, they will pay in local currency Lao kip at the exchange rate doing payment. The debt is still in U.S. dollar, but they have to pay. And as you can imagine, the Lao kip depreciated a lot. So they were slow in paying the Lao kip portion and that group. So in the past, we have been holding back a lot of royalty payments to so-called offset the gains that Lao kip portion, all right? So we told the government, this is not sustainable. That's worked up a long-term solution. So they agree. So now what we are doing is we will cover all these long-standing loans, convert into a term loan and charge the interest officially. And that term loan will be serviced by the payment from EDC. So we will no longer need to worry over collection. We will no longer need to call them and chase for payment every month, all right? It will automatically go under the EDC collection, right? So that would enhance -- so my trade receivable will drop from 5, 6 months back to 2 months -- up to next 2 months. So realistically, I'm talking about dropping from today about MYR 270 million to maybe about MYR 120 million. Yes. Okay. So that will benefit. So how does it benefit us in terms of P&L? Of course, number one is I get to collect the money over a period of time, and it's also cover against EDC payment. And number two is I will enjoy interest rates, U.S. dollar interest income from this outstanding receivable, okay? So we will benefit from that. And we are also trying to help the Lao government to provide some money to ease their liquidity position. So we are going to securitize against the future royalty payments, all right? So whatever we pay upfront will represent the right that we need to pay in the future. And you may not see a very huge benefit in the first 10 years because the royalty is only at 5% of revenue. But you just imagine after year 10, the royalty goes up to 15%.

Is there a cap?

15% of revenue. So we would have already paid for that, all right? And the last 5 years of the concession, the royalty goes up to 30% of revenue. So we would have also already paid for that. So you can imagine how the earnings of Don Sahong will be, it will be pretty good throughout the entire 25 years rather than front-loading earnings. And then in that end, I lose up because I'm going to start paying higher royalty. I'm going to start paying [indiscernible].

It sounds very similar to like the petroleum income tax kind of way of government making off the top line in a way for this either way.

So it's -- of course, we work out based on a certain rate of return, which is decent, which is very decent.

Is there a cap to how much that the royalty can be charged. Is 30% a cap? Or is there any leeway for the government to charge you even more?

The concession agreement, the all -- the existing rates stay, but of course, pushed forward by 5 years now, okay? Because we already enjoyed 5 years of 5%, right? Now we're going to enjoy another 10 years of 5%, okay? And then only followed by 15% for the following 10 years.

I understand. And if you don't mind math asking from the Lao government's perspective, knowing -- I'm pretty sure they do their own math as well. Why would they allow this to happen? Is it because certain goodwill that you guys did or certain economic value they can derive even though at inflation?

We have always been working closely with the government. We have been very supportive of the government, and the government has also been very supportive of us. So we do make concessions in the past. I don't know whether you are aware, we were actually ready in 2019, but the Lao government, despite various reminders, were not ready in their transmission line. And under the agreement, is take or pay. So ready, you're not ready is there to pay. But realistically, how we're going to charge government where you do sell, so we waived it. But we waived it in return for the COD pushback from 1st January 2020 to 1st October 2025.

Understand.

So we've got kind of a 10-month extension. So we help them. They help us. So at the end of the day, from a return perspective is good for us, and we also help the government software existing financial issues.

Yes. Just to double click on the payment, the 10% payment on Lao kip, is there a particular reason why initially it was not a full 100% since anyway, tariff was pegged to U.S. dollar. Is it because -- is this a way of them supporting the demand for their own currency by this payment?

No. Initially, it was negotiated that way because our power is not meant to be fully sold to Cambodia. It's meant to be sold also to the domestic market, okay? So but -- and the collection is in kip. So therefore, they pay you in kip, right? But then now, we are actually 100% sold to Cambodia. And they collect -- they make the margin, a very decent margin from their sale to Cambodia. They sell it to them for MYR 0.074, all right? We sell it to them for MYR 0.06 plus. So they have a margin. So with this margin, it can also cover all the future settlement of the restructuring loan portion. So they didn't have to come up with additional money. So we kind of like tie them over.

Understand. I think just to follow up on that as well, [indiscernible] is asking about is there any tax exemption or anything apart from the royalty they've disclosed. But because of this relationship and the new PA -- new CA with the government, are there any like tax benefits or tax status of all these payments being recognized?

Under the OCA, we have a 5-year tax waiver, okay, tax exemption. And that tax exemption supposed to expire on 1st October 2025. So starting -- sorry, starting from 1st October 2025, we would have to pay a full corporate tax rate of 24% under the existing agreement. But with the renewal of the CA and the PPA, there will be some form of tax incentives, but not to the extent of full waiver for the next 5 years.

Okay. In terms of the O&M expenses for the first fall, which is starting this year or next year, correct me if I'm wrong, how would that -- in terms of the towards the cost and the bottom line, what kind of percentage are we talking about? Or maybe you can give us even better figures, how O&M is going to impact your bottom line?

I think the bulk of -- again, starting from end of this year or latest by early next year, we will start overhauling one turbine, okay? And we are hoping, that's our target, but we have to monitor. We are hoping to overhaul one turbine a year. So in other words, by the time I overhauled the fourth turbine, the fourth turbine would have operated for 5 plus 4 years, 9 years before the overhaul, okay? But if you can stretch it like that, then we will overhaul 1 early next year, 1 early 2026 and so on and so forth. And because we have 5 turbines now and overhaul is meant to be every 5 years. So you can safely assume that from next year onwards, every year, we will overhaul one unit on -- into perpetuator for the entire concession period, all right?

What's the target -- if you know the granulites of per overhaul of 1 turbine?

I mean I think the first overhaul, of course, may be cheaper. When you reach 20 year old, may be more expensive, I think that's natural. But based on the first overall overhaul, we expect it to cost around USD 2.5 million to USD 3 million, which we expect in a worst-case scenario, all this will be expensed out. So it will cost us about MYR 10 million or, let's say, about MYR 13 million, MYR 14 million, yes. So that will increase the cost of O&M. On the top of the fifth turbine.

And this is already packed into part of your CapEx now?

No, we consider as operating expense not part of CapEx.

Okay. Okay. Yes, Rondy?

Yes. I think you gave some details about the new PPA and CA also. But I think what I want to try and allude you to is, it seems like Lao is sort of like having some sort of financial difficulty perhaps it's due to the China debt threat or something like that. I'm just wondering whether there are any other opportunities, perhaps not just from the point of view of Don Sahong but is there any other assets that potentially up for sale if there is good like sales that -- be it like hydro or any other renewable energy that Mega First is looking at in Laos?

Okay. Before I answer the question, I think it's worthwhile to clarify a little bit. Lao is not in China debt threat, okay?

I mean that's what I see a lot on the news a lot, but...

China is a big ally of Lao. The debt that was occurred from the construction of the railway from Kunming to [indiscernible], it's largely funded by China, but the payment terms are very lax. When they make money, then they pay, okay? Because it's actually good for both countries, all right? So I wouldn't call it debt threat in that sense, okay? In fact, now it's doing very well. It's doing quite well. A lot of goods are moving between the 2 countries. So that helped the economic development. But in terms of the financial -- fiscal difficulty is partly because, again, of how U.S. dollar has helped hostage a lot of emerging countries, okay, where things are pegged to U.S. dollar and then the local currencies depreciated substantially. That caused a lot of pain, economic pain to the people of Lao and also to the country itself. And we, as a operator of Lao hydro power plant, we are trying to help in whichever we can. Of course, there were ideas of selling some of the assets. I think that is still being discussed, been talked about. Of course, investors want the best deal and the seller will want the best price. And as you know, not all the assets are great. And I don't think they allow cherry picking. Then we start with all the bad assets. So a lot of negotiations, a lot of discussions are ongoing with various interested parties who are willing to invest in Lao. We also discussed, but nothing to talk about.

Just to clarify one more time, as I was tapping out the answers. So there is no more tier up and tier down come 1st January 2025, it will be a flat structure all the way for the next 25 years.

No. I mean, without disclosing exact rates, it will be a flat structure.

Rather than having tier and all that kind of thing.

Rather than go up and come down and go up again, it'll be a flatter structure. If I tell you the rest then...

I understand. But will the rates be better or worse?

[indiscernible] at MYR 0.0615.

Okay. Got it. That's how I answer I just want to be make sure I'm answering correctly.

There are a lot of clarification request on the tax, like what is the new income tax rate structure for the new 25 years and...

I mean the tax rate is still 24%, but we are not going to enjoy exemption for the next 5 years. There will be some form of tax incentives, which, again, if I were to tell you the numbers, then I'm going to exact details, there will be some form of a tax concession.

With the details -- I mean, will it be fair for me to ask, will the details be available in that quarter? Or do you think that it would be something confidential for a very long time?

No. Once we announce, we will tell you exactly what it would be.

Okay. So just wait until quarter end.

I mean once we sign, we will announce. So it should be -- hopefully should be sooner.

Okay. Shall we move away from Don Sahong? Is there any other questions?

I think just because it's in energy, there's one on solar somewhere I read this Rondy. You see it? The LSS5. I think it was related to LSS5. I think I found it. Okay. So for LSS 5, I mean, I think in previous quarters, you've told us that LSS 3, 4 was an profitable or the tariff wasn't as exciting. What were the improvements in LSS5 that make you think that it's like worth going in?

Interestingly, for LSS5, those who be too low will not even be considered.

So there's a minimum hurdle.

I think we realize that, okay, if you look at LSS 1, 2, 3, 4, all right, the execution rate is not high, okay? And most of the time, it's because, oh, they realize they can't make money, oh, they realize they cannot achieve financial close because no banks want to lend their money based on the kind of returns that they generate. So I was told, of course, all these are -- is the discretion, is there a prerogative? But I was told that if a bit too low, you'll be thrown out, okay? So the -- I think this time, they really want people who are more genuine and do your calculations properly. And not just bid for the sale of winning and then negotiate for extension. And I was told that we are still in the band or within their band they're looking at. But let's wait for a few more days.

Yes. It also related to the same question. Obviously, based on what you just explained, margins should be sustainable. But in terms of profitability and in terms of sustainability of this tariff agreement going forward, would you think if LSS6 will be rolled out, will this be -- LSS5 will be a good template for them to...

I think every LSS has improvements over the previous LSS, okay? I think the government is listening to a lot of feedback. Like, for example, CGPP, I think the feedback wasn't that great. Let's look at the CRS, which is a corporate RE scheme.

There was another question on CRS actually.

So of course, a lot of people feed back to the government that Tenaga's loading on wheeling charge is exorbitant. So there are always discussions to see how we can improve from that so that the premium on hydro energy tariff will not be too high versus today's rate. So today, let's say, you're paying around MYR 0.50 odd, if you use MYR 0.45 as TNB loading and assuming today's panel costs and you need to price it at around MYR 0.21, MYR 0.22, that will bring it up to MYR 0.66, MYR 0.67 right?

I can imagine that there is.

So the question is who would be willing to pay 20%, 25% premium on electricity. Data centers may.

Yes. For the branding.

But I think data centers should pay even more because they are guzzling our rare precious commodities.

Correct, correct.

Not to the benefit of Malaysian citizens.

Absolutely, you're right.

So I disagree with that, and I think they should pay even higher even up to MYR 1.

MYR 1 for them is still cheap.

Yes, it's still cheap. If you look across the globe.

Precisely.

Right? So -- but other than data centers, I mean, who else can afford to pay, okay? So I think there are a lot of discussions, all right? And then if you were to install battery, MYR 0.25 is the willing charge. But you install battery today's battery cost is still not cheap. So unless the battery cost comes down, today, I think the battery cost is around maybe about USD 130 per kilowatt. And if it continues -- it has been coming down, but if it continues to come down, then maybe it makes sense. Alternatively, [ the Naga ] can say, okay, instead of MYR 0.25, why do you load MYR 0.20. So a lot of discussions are ongoing, all right? But we are definitely interested to explore that area. [indiscernible] as well.

I understand. understand. Probably one last question, Rondy, since it's related, okay, it's a bit outside, but is the company -- I guess the question for [indiscernible], is the company involved in EV chargers or components of EV or going into.

No plans.

Okay, great. Yes. Maybe just a clarification. The land in [indiscernible], we have 688 acres of land, is that earmarked for the LSS 5?

No. LSS 5 is on another piece of land, which is also in Berhad. That is a land that we are leasing from a state agency. Whereas the one that we bought is for CGPP for both our project and Pekat's project. So we have 30 megawatt AC, which is about 50 megawatt peak. So we have 50, Pekat has 50. So total is 100, and that will occupy, including all the peripherals and everything about 250 acres of the land out of 688. And then if you strip out the water body, we still have another maybe 200 to 250 acres of land that we can use to develop our modern farming going forward.

Okay. Shall we move on, Rondy?

Yes. So just that answers [indiscernible] question actually. He asked, elaborate the development of 688 land. So about -- I would say about 60% of it is for renewable energy and then the balance is for the farming.

Yes.

I think it's about equal. And for the LSS 5, it is going to be on a leased land.

Yes, that one is already bidded. So it's on the lease land.

Okay. One general group question before we move into either resources or plastics is change in local and foreign institution holding year-on-year. I think we did discuss this before the...

We -- I mean, I don't have exact numbers. I've gone through the list, but I didn't go and calculate...

How often you give an update? On a quarterly basis?

Once a month. Yes, once a month. So I think institution -- more and more foreign institutions are becoming shareholders. The local institutions are still a big part, but they go in and out. They do go in and out.

Since you mentioned that, what's the average holding period on either local institutions versus foreign institutions?

Local institutions, I think they do...

6 months, 10 months.

No. I mean Fidelity has been there for 10 years, yes. Yes, maybe 10 years.

But local, you said in and out, it's probably like every 6 months.

It depends on the share price performance. So every time when we -- when the share price moves up, you see a lot of people just take profit.

Understood.

Interestingly, the long-term shareholders are older individuals.

They form your bedrock.

If you just take our annual report for the last 10 years and you look at the top 30, anyone that carries individual names, they are still there.

And not changed much actually.

Okay. Sorry, just now since we mentioned about Pekat maybe there was a question, Yeow. Can you give us your outlook about the switchgear acquisition because you are also spending about $40 million into it, right?

I mean, okay, this was actually Pekat wants to buy, right? And Pekat wants to go into the switch gear because they think it is a very good complement to their business.

Yes. Perhaps I guess this person is asking why is Mega First -- I mean, why are they using Mega First together into buying this company? Why not that...

Rather than going -- rather than getting Mega First's, is it balance sheet support? Is it because...

I don't know what Pekat says, but I think Pekat is too, maybe a little bit too small to carry the entire thing. And I think this industry has got pretty good prospects given the way that the renewable energy landscape is going to change, right? If Tenaga needs to spend, really spend MYR 90 billion on building the infrastructure, so that would mean a lot more switch gears are needed. And there are only a few suppliers in Malaysia for switchgears. So EPE is one of them. So I think they will benefit from this over the next 10, 20, 30 years.

Yes. I think the announcement was announced probably 1 quarter ago. If you don't mind me asking what has been the delay? What's the reason for it?

Yes, there was a due diligence being done. if I'm not mistaken, it should be completed very soon, probably by -- if not yet completed, then it should be completed by sometime in December.

Pekat's own in-house team or is it a third party...

The one is done by Pekat.

I see. So you guys will not -- yes, I understand.

I mean they will brief us. They will share with us whatever we want to know. But the work -- the heavy lifting is by them.

I see. Got it.

No, I think that is all I can see on renewable energy.

Most of it has been answered actually. Still got some coming in PPA agreement, but I think -- yes. So maybe we go to Oleo because it's the first question that was asked by [indiscernible]. He would like to know when the oleo business will turn around? And will the current high CPO prices affect the earnings of MFCB?

I mean, as I've mentioned earlier, the turnaround of oleo is longer than we expected. Initially, we thought after the major refurbishment in second quarter of this year, we should see gradual and steady increase in the plant reliability. But as we move along, we realized that there are new problems that have cropped up. So we always take the position that if we need to address it for the sake of longer term, we will address it and kind of like bite the bullet and suffer the losses. So -- but we -- according to management of -- which is [indiscernible] and the team is we should be towards the tail end, all right? After all that they have done, they should be able to stabilize the plant. But we will not know because everything else is ready, except the boiler. Without the boiler, I can't run to the full extent. So today, we are running even our alcohol plant, we are only running about 60%, all right? Until the new boiler is commissioned, which should be commissioned by -- they are now rushing the work. So it should be commissioned sometime around mid-December. Once it's commissioned, we will try to ramp it up to at least 85%, 90% efficiency. And if we can stabilize at that level, then I think we should be able to see a turnaround in earnings, okay? But of course, there's always this big if, right, whether you will discover new problems again, okay? But the way I can describe in layman term is -- it's like you bought a 30-year-old car. You replace parts that are obviously spoiled and then you try to run it. But as you run it because it's a 30-year-old car, you will find other parts giving away. So you keep on repairing and when you have repaired so much, let's say you repaid 90% of it. So logically, the chances of new surprises become less and less, okay? So this is where we are today, all right? That's why even when we talk about the prospect notes -- prospects, I don't talk about fourth quarter anymore because fourth quarter is written off. We will still be losing money for sure, all right, just purely from operation. But when I say purely from operation, I am losing money because I'm not running the plant efficiently, okay? I'm only running at 60%, and that confirm cannot make money, just like any petrochemical complex or oleochemical complex. Now assuming that I can run at 85%, 90%, then I should be making some money, okay? That is one side of the equation. The other side of the equation is, oh, with all this volatility in currency, with those volatility in CPO prices, how does that affect us, all right? Now we normally do not take open position. We normally hedge our position. So if we are long, if we have physical raw material stock, which we have not yet sold in future sales order. So we are so-called net long. When we are net long, usually, we will try to sell in the future market so that we lock in the kind of margin. So everything is fine if everyone delivers their portion, okay? But in the real world, it doesn't always happen that way, okay? I'll just give you 1 or 2 scenarios to illustrate my point. Let's say, I'm supposed to deliver to this customer next month or two months down -- okay, let's say, two months down the road. So I would have hedged, right? But because the prices spiked like what we saw in the last 2 months, 3 months, the customer will say, oh, can I don't take delivery. Can we push back my delivery, all right? What does that mean? Pushback means when, push back to, let's say, one month, two months later, hoping that the raw material price will correct itself, especially today's situation because not all the people that I speak to, I'm not saying that everyone, but the people that I speak to all did not expect it to spike the way it did because if you look at demand/supply, globally it's weak, right? Capacity is there. Why suddenly it spiked like that, right? So there could be some speculative activities. There could be some governmental movements in the way they change the policies.

Especially the biodiesel.

Malaysia, will say something, export tax changes, structure change. So a lot of these are affecting and influencing the commodity prices. So when it spikes the way that people think it should not, everyone will hold back, right? Those who have placed order will say delay delivery. Those who have not placed order will say, I don't want to place order today, let me run down my inventory. So because of all these changes, it makes it impossible to hedge in an effective way. So occasionally, you gain. Occasionally, you lose. But in today's context, we lose, okay? So there is -- and then when you look at the currency, the way it fluctuates from MYR 4.72 in 30th June down to MYR 4.12, that's 15% gap and then rise up to MYR 4.4, it creates a lot of situations where business decision is very hard to make. Despite our position that we don't speculate, it still creates chaos amongst -- and this chaos can translate into pretty significant losses or profit either way. Okay, either way.

You don't want to be caught on either side.

Yes, you do want. I mean, Mr. Goh always tells me, we don't mind high as long as it's consistently high, then we will adapt -- we don't mind below as long as it's consistently low, then we will adapt as business people. But when it's up and down without you knowing, it's hard to do.

It's like sipping a coin every day.

Yes. I mean if you look at [indiscernible] results, even they are not immune to what is happening today, all right? But we are very focused on increasing the reliability of the plant because that is something that is within our control, right? So once we get that up, which we think we can, then 2025 will be a new chapter for us. So let's hope. If it doesn't work, then let's review it again. As I've said many times, our investment is manageable, all right? Unfortunately, we had to equity accounted, but doesn't mean that we have lost so much money, right? And if you look at the NTA, it's still pretty positive for now.

Understood. Thanks for that elaborate scenario description because I didn't realize that contracts being ordered cannot be honored because I thought that because it's already locked in at this price, you already have that inventory, they have to take on delivery.

I mean you can imagine -- you can appreciate why they do it. Oh, so high, why must I take delivery now. Pushback and if is customer goodwill, right? Especially the big ones. So we are normally better off compared to the big boys because the big boys, if we are dealing with, let's say, the big organization. Yes, Unilever, for example. If Unilever say, can I push back by 1 month, you're going to say no.

Or Nestle comes back to you.

You see who's got better bargaining power. So you are [indiscernible] we will scramble and try to see how to hedge it and how to change the hedging policies and all. So it is a reality of Lifeline or Reality of the business, the industry.

Rondy, I think we answered 2 -- 3 questions related to Edenor.

I don't see much questions about it anymore. They just ask like would you have considered to sell Edenor? What's your exit plan for Edenor because it is...

It doesn't sound like. It doesn't sound like they're going to exit.

Yes. I mean we -- as in any business, we will always review it in a very objective manner. For now, we don't have any plans to exit. We are still fully behind [ AKL ] and his team. So don't forget they are also individuals.

And they also have skin in the game.

They have skin on the game, on the table. So we will always discuss openly how we look at things, and they seem confident so we have got to believe them.

Okay. Got it. I want to move on to food security quite you want to we do resources first because resources. I don't see any questions, though.

Did the robust volume able to sustain coming quarter. Majority of the resources business is contributed by which region or which destination?

I mean the demand in volume terms, not in terms of number of applications, there are many, many applications. But going by volume, the 2 biggest consumer customers of ours are one in mining, extraction on nonferrous metal like nickel, gold, copper, that kind of metal. [indiscernible]. The other industry is a steel industry, all right? So people like Anju, Southern Steel, Lion Steel, all these people will need grid line. And our domestic market is quite stable. Export market is growing because of the growing mining activities, which is mainly in Indonesia and Papua New Guinea area. In India side, it's mainly the steel industry. In Australia side, it's mainly the mining industry, as you can appreciate it. So we sell to various countries. India today is a no-go for us, although it used to be one of our biggest customer region because of the freight rates. So we become less competitive. So now our sales are mainly to Indonesia, Papua New Guinea and Australia and some of the Philippines as well.

Okay. So I guess the question for Resources is that you mentioned that the selling price had caught up, hence, we're seeing the margin improvement. Is this -- I mean -- and probably right now, you are seeing resources as one of the top performing for many years. Is it sustainable next year? Or do you see that this is kind of like peaking already?

Of course, we always will work towards growing our volume. There are still opportunities out there, especially in Australia and the Papua New Guinea area. And we will always work hard to get into some of the mines operating in Australia in those regions. So if we can get in then we can grow the volumes. It's as simple as that, all right? In terms of pricing, we have got to remain competitive. And when I say competitive, it's never in absolute term. It's always in relation to what alternative suppliers does the customer have based on their location, all right? So if you are in, let's say, Medan, okay? Are we more competitive or Indonesian suppliers more competitive, right? So the pricing has got to reflect that, okay? So in a country where you don't have any local supplier, then you're going to talk about, is it cheaper to ship from here today or from Thai today or from Vietnam today or from China today because these are the producing countries, all right? So we have got to then look at them and say, oh, how do we compete with them given the.

How often is this done? I mean it's...

It's ongoing. I mean we have quite a few customers who are with us all the while. but there are customers who go on, let's say, tender. There are customers who go on maybe 1-year contract, 2-year contracts. So after it's done, then we have to go in and bid again the scenario. So we think Australia still has a lot of potential because Australia doesn't have a very competitive supplier because Australia doesn't have good limestones. Their source of lime is mainly from sea shells. And sea shells, of course, environmentally, you can imagine it may not be so friendly, plus the calcium carbonate content -- calcium oxide content is low. For us, in Malaysia, we are blessed with very good reserves. So we can hit like 88%, 90%. Gas is like 75%, 80%. So that determines the reactivity of the line. The lower the reactivity, the more you have to use to achieve the same results. So we are competitive in that sense. So now more and more countries are trying to break into Australian market, whether it is from Thailand or from Vietnam or from Malaysia. So these 3 countries are attacking Australia now.

But wouldn't the logistics cost even out for those closest geographically to Australia?

Well, the 3 countries are around here, Thailand and Vietnam.

Yes, not much difference in terms of freight shipping.

Yes. So it's -- and Australia prices are reasonable.

Yes, moving on. I see some questions on [indiscernible], but I want to inject this in before we move on to the next business unit. What's the one thing you've learned from Mr. Goh that you remember forever? Are there are too many things that is filed away in a different category or...

I've learned a lot from him, especially basic business principles. It all boils down to business principles, right? How he look at things and how he see things and -- so too many things.

One separate session on that. Okay. It's like Charlie Munger Chronicles or Charlie Munger, that one. Do you want to go into plastics or food security first?

Any.

Okay. So we'll start with plastics. Anonymous attendee have asked for the Plastics division, mainly are the single-use or biodegradable? Any impact to margin if it's one or the other? That means if it's single-use, better margins or biodegradable, better margins?

We have -- I mean, Stenta has developed our own biodegradable film. The question is not whether we want to sell biodegradable. The question is, are customers willing to pay a premium for biodegradable. So of course, we will encourage customers to do it. But not all will be willing to pay a premium. But we have existing -- we have the technology, we have the product to sell if they want it. Secondly, on the converting side, we are also promoting our customers to use a single material packaging solution. As you know, the flexible packaging typically consists of multiple layers and each layer serves a purpose, all right? The most outer layer will always be good for printing. So when you print on it, the color, the sharpness is there.

Yes, there's a vibrancy to the color.

And that is obviously very important to consumer goods company. So you look -- it's very simple, you look at Korean Ramen packaging versus our local Maggi Mee packaging. You can know instantly that, that Korean one is a premium. Right, purely from the packaging.

10 meters away, you see.

Then, of course, you need a layer where it's called a sealant layer. that seals well. So the boiling point must be at the right level so that it doesn't crumple. You look at Maggi Mee, it crumples. So the ceiling is not the most beautiful one. And then, of course, you also have the physical barrier that could be in the form of aluminum foil or aluminum coated film to preserve the freshness of something that is crispy, again, like biscuits, like potato chips. So the longer the shelf life you want the product to have, the more physical barriers you're going to put in. So if you need longer, then you may have to use aluminum foil, not the vaporized aluminum plastic sheets.

Interesting you raised this point because in terms of the trend today for ready-to-eat meals, there's a lot, especially in China, where you have some sort of a chemical reaction process to actually heat up the food. And do you see that trend happening to our local markets here where you have rice, you have some condiments that is actually frozen. They pour it out and then they pour just normal water into a chemical sachet and then it starts cooking.

Yes, I don't belong to that group of people.

But is it a trend -- I mean, is it a trend that you see helping the business or not?

No, not really.

Not really.

The one is the heating technology.

Yes. But the packaging, we have to take out the heat, right?

That's normal. I mean it's just another form of packaging. It's just different technology that's all.

Understand. So isn't that because now the boiling point or the temperature, the packaging needs to take it, then it translates to more business.

No, there are existing solutions.

Understand.

Put it this way, right? The question is do you want to go into it?

But you don't see that trend here.

Not that big. Not that big, yet.

Understand.

I mean, I personally won't go for it. Because Malaysia is still pretty much fresh.

Fresh food. It's cheap.

You cook yourself or when you go to Family Mart, you also want to cook yourself or what is cooked in the open store for you. I don't know. I mean, definitely, there's a trend, how far you go, I don't know.

Yes. So Mr. Yeow, I think the company had invested about MYR 80 million in packaging this year across 2 factories, one for Stenta, one for Hexachase. I guess investors are wondering whether looking at the current soft demand, whether this sort of expansion comes a little bit too early? Or is it something that is among a necessity that both company needs to expand?

We definitely need to expand because at the point where we decide to expand, we were almost maxing out our capacity, right? Was it timely? Answer is, yes, maybe not that timely. That's why if you look at all the guidance in the past 4 to 6 quarters, you will notice that we keep pushing back on the completion time line, not because we are inefficient. It was deliberately done that way so that we don't have got to live with the additional capacity when the market is very big. But there's only so much we can do, all right? So the factory is -- the factory that we built is not meant for the next 1, 2, 3 years. It's meant for the next 5, 10 years, okay? So that is a conscious decision to carry the building rather than build one small part and then you expand and keep on expanding. So that part, we are conscious about it. When it comes to capacity, we can time it, all right? Of course, in Stenta case, we have already booked and paid for 2 lines. So we have got to take delivery of that, right? For Hexachase, we did modify. So we lowered the amount of new lines to be installed in Phase 1. So we will gradually increase the capacity. It will not be like one shot bump fill up the whole plant.

Okay. I don't see any more questions on packaging. Yes. Perhaps I'll move on to -- there's quite a number of questions about Bloxwich actually. So Bloxwich International has, on 11 September, completed an acquisition of OPT Precision for $2 million. So basically, Mega First via Bloxwich is acquiring a sort of like, I guess, it looks -- what looks like a metal stumping house. May you give us some color on that? Can you give us some guidance about the current capacity of Bloxwich and the acquisition of OPT, maybe in terms of number of technicians, number of CNC machines and how many access of CNC machines?

Okay. To be honest, we, I don't know that much about OPP. Bloxwich site is a very small operation of ours. Is doing reasonably okay. And the acquisition is to support what they want to do. Now they want -- they have been expanding their manufacturing capability because they have been qualified by a few automotive companies, not just in Malaysia, but also in Thailand and if I'm not mistaken, also Indonesia as well. So our sales are growing. So they want to strengthen their capability by owning their own CNC machines, owning some stamping capability, molding capability and everything. So that's where -- that's how they want to expand, all right? In terms of how many, I don't know. But Bloxwich I think every year, generates around MYR 30 million of sales now compared to it term. Compared to a few years ago, we do only MYR 6 million, MYR 7 million a year. So it is growing quite nicely. And they make -- they used to break even or small losses or make small profit. Now they make around MYR 2 million to MYR 3 million a year. So that's not bad.

Is this acquisition -- do you look at it like there could be some potential synergy with your IST when it comes to like building them.

That's purely Bloxwich. Bloxwich has got a different set of management that try to strengthen its own capability as it breaks into more of the automotive customers' business.

There are questions that is like can share more on how IST and Bloxwich is doing recently.

IST is still -- I mean, it's not losing money, but neither is it making huge profits. There's a slowdown. I think every year, IST turnover is probably in the region of MYR 30 million, MYR 40 million, which is decent. But at the peak, they were doing like MYR 70 million. So that was when they make quite a fair bit of money. But I think in the semicon space, there's a lot of competition. There's also -- there's a slowdown in terms of the kind of equipment that they do. So right now, we are still building and strengthening, but we are not seeing a big jump in sales.

Okay. So for both Bloxwich and IST, currently, we are doing about MYR 30 million, MYR 40 million in revenue.

Yes.

Okay.

And both are profitable.

Both are profitable...

Not very. I mean, nothing significant.

I sneak in one group question, Rondy, while you're looking [indiscernible] related, I think it's the same guy. anonymous attendee is asking, will the company increase dividend payout? I'm thinking he's referring to the ratio. And is there any plan, okay? And I know it's not within your control. Any plan to improve the liquidity and volume of the shares?

I think the liquidity has improved. If you look at it in the last 12 months versus 12 months before, it has improved, all right? But maybe not to the extent that a lot of people want or even institutional fund managers want it. I've come across fund managers who ask me, I would like to buy our shares, but.

The block is still small.

It's just not too liquid enough for us because the exposure is minimum, a few million U.S. type, right? So -- but there's nothing much we can do. We did a stock split, but even with more scripts out in the market, it doesn't change anything because a lot of our shareholders, they are quite long term. The institutions do come in and go -- do come and go. [indiscernible] came in, bought a lot I think they need to realize some profits to pay dividends, so they sell down and then maybe they come back again, EPF does the same thing. So everyone does the same thing, just go in and out. When the share price move up to 5, they say, oh, it's time to take profit, then it came down, then buy back. So we kind of track that. But in terms of dividend, I think we are still -- we will still keep to our word, which is we will continue to step up our dividend. If you look at the cash flow, if you look at the investment cycle, all those that we have worked on is almost coming to the tail end for now unless there's new ones coming up. Once we paid USD 100 million for the securitization of the water rights, our future cash flow is huge, all right? We are talking about every year, we will generate around close to MYR 700 million cash. Pure cash, all right? And if you look at our CapEx plan, we don't have any big items yet, except for some solar projects, okay? Packaging, the capacity that we will be installing by end of first quarter will need some time to digest. So there won't be much CapEx after that for at least 1 or 2 years. Resources side, again, because of the uncertainty, we are not going to expand for now. So that also slowed down. The only one that still involve a lot of CapEx will be.

Food security.

Food security, is not much, okay? It won't be like 100 million, 200 million ton, maybe 10 million, 20 million, 30 million kind of range. So that is manageable. But renewable energy, it can be quite chunky, like 100 megawatts will cost you at least MYR 200 million, right? And provided you do LSS, if we do like Mount it's even more. So we are still tendering. And just based on the CGPP, which have not -- which we're going to start now, plus if we get the LSS 5, these 2 projects alone will cost us MYR 300 million, right? But one year cash flow can more than cover it. So the long and short of it is we do expect next year our debt to come down quite substantially. So honoring our step-up dividend policy should not be an issue. And if over the next 2, 3 years, we still have not found anything substantial, then we will look into stepping up either dividend even more or through share buyback.

I'd rather you have [indiscernible] 2.

Everyone knows including myself. But we have got to be very cautious, right? I mean you don't want to destroy what you have built so far by making a big mistake on the project.

I understand. So a good chance since you mentioned about the water rights, someone wants you to double-click on -- can you explain further what does this water rights payment entail actually, the USD 100 million.

We pay them upfront for the future water royalty that you have to pay?

Yes. So actually, in relation, maybe the question was asked before that. So earlier, Mr. Yeow mentioned about the royalty step-up payment for the government, and this water rights is actually packaged in that way to pay for that upfront. And I drew parallel to the petroleum income tax in Malaysia in a way. Okay. Maybe we move into food security. Yes. Food security, okay. Regarding the food security division, it says that management expects earnings to improve substantially over the next 5 years. Can you -- is the food security division, can we expect it to be profitable next year?

I'm hoping that it will be profitable. But even if it is profitable, it will not be any -- it will not be significant at all. Because -- okay, let's split it up, all right? Let's talk about Cambodia first. Cambodia side, the maturity profile, the mature area is still not that big, okay? But every year, you will add. You will add 200 hectare, 200 hectares, 300 hectares that kind of scenario. And as you add the profile of the [indiscernible] are still young. So the yield is still low, all right? So the contribution cannot be that much. But we are now under pressure to produce because I just came back from Bangkok and the indication is the demand is strong. Strong is a relative term, but strong relative to how much you can.

Strong in what sense, closer towards the final finish value add.

They are looking at us as the raw material supplier.

So still at a kind of commoditized.

We are producing food ingredient, food ingredient market. We are catering for food ingredient market. So we work closely because they want us to supply, right? And then they will then do some value-added activities and then on sell it to F&B companies or snack companies or confectionery companies or even food flavoring companies, all right, because coconut is a very good source for amino acid, all right? So we have our own food flavoring products as well. And our customers do buy to produce their own food enhancer products. There are people who also ask us to do OEM for them, right? So based on their growth trajectory, we are having difficulty coping catching up, difficulty coping -- and we have got to really fine-tune the process, which we are in the process of doing so. So hopefully, it may take a couple of years. We can develop that process in a more efficient manner. And hopefully, our plant yield will rise, all right, because year 1, the yield is very low. So it is loss-making. Hopefully, when the yield hit a certain breakeven point, we will be able to turn profitable, right, because the cost is all about yield, okay? The cost is the same. You harvest how many kg makes a lot of difference. 1 kg means you divide your cost by 1 kg. If your yield goes up to 4, your cost is reduced by 75%. That's what it means, okay. So we are building that up, right? On Malaysia side, the one that can contribute maybe more meaningful based on the existing portfolio that they have would be the durian.

Because of the premium pricing, is it because of?

No, because durian is you know the pricing. So the durian, we are a small portion started flowering and more and more will flower over the next 2, 3 years. So we are seeing second round of flower now. But it's still not a lot. I mean, maybe you sell only tens of thousands of ringgit that's all. But we are waiting for the maturity to kick in, which will take time. All right. When it comes to the greenhouse side, we are getting ourselves ready to expand in a big way. So the land in Toronto, we are going to submit [indiscernible] soon. I've seen the layout already. Everything is being organized. So once we get the [indiscernible], we will start because we need a center in the northern region to supply to the Northern region. And then the southern side will be taken care of by our [indiscernible]. And we need to build in tandem with how market develops, right?

You don't want to build too fast.

We will always have some spare capacity, but we cannot say I won't be 100 acres means I'll be 100 acres, right? 100 acres sell to who, right? You must have customers. So we are in the process of also building this customer base and we will have to move in tandem. And the faster we grow then the better we are, the faster we can make more money.

Thanks for making that distinction. If I were to go back to the coconut side, since you already see that kind of demand and you feel that there's a gap in between what the demand is and what your supply side is, what's stopping the acceleration of the planting? Is it more. Okay. It's really just. No, no, I mean, whatever you've planted, I mean, you've not planted like more than 50% of the acreage yet, right?

No, we've planted more than enough for our purpose for now.

I see. I see. Okay.

You're just waiting for it to mature.

Understand.

After it matures, you are waiting for the yield to go up. And just bear in mind, this is the first time that it's done in this kind of ground. We don't know how the yield curve will look.

I see.

Is not home run, okay?

It's not your plant.

It's not home run like Oh, my neighbor already got this track record. So you can more or less know because we are on the same land, same environment, same elevation, same weather, same rainfall, same soil. We are not -- we plant in Mondulkiri, which is not -- we don't have any historical numbers for coconut. Let's put it this way. So we are guinea pig ourselves. So as much as we would like to use UP's U curve or other coconut plantations U curve or Thailand U curve, I said, look, these are biological products. You cannot be 100% certain.

It's not manufacturing.

Yes. Weather is different, right? All is different. Everything is different. The way you irrigate, the way you fertilize is so different. So we will keep on fine-tuning it. And hopefully, we can get a yield that is efficient.

There's a question from [indiscernible]. Can we have a free durians for Mega First AGMs?

I don't know whether they're allowed.

I think he's definitely kidding. I just...

Anyway, if I May, I don't think that's a season.

I think we are closing on to 2 hours already, Mr. Yeow. Another 10 minutes. So I guess just on the food security, because the way we see it is that for your food security division, it seems like there are a lot of parties from Cambodia to Thailand to Malaysia. And it goes across people doing things in the upstream to like the downstream across agritech and green house farming. I guess the question is like what is the end game? Is this food security division something that you can spin off and IPO in the future? Or is it just a division that is going to help the group to collect a lot of profit in the future?

I mean our purpose of going into a new business is if we think that this is a good business to go into. It's going to make money. It's scalable, and we have the right people to do it, okay? So if there's any part that's missing, we probably won't do it, right? Whether we -- whether we have an exit strategy, yes, of course, we can always IPO it. We can always sell it. We can merge it with somebody else. But that is never the original -- that is never something that we set from the onset. When we want to build a business, we always look at it as a long-term thing, all right, a long-term thing. So -- and we know this business is going to take a long time to build, right? And if you manage to build it successfully, then it becomes a sizable business. If it doesn't, then we have to evaluate what options do we have, okay? Do we want to list it? Do we want to sell it? Do we want to let other people who are better to run it, then we just sell it off and merge it with somebody else who is better. I mean you just imagine -- I'll give you an example of what we did in D&O. We used to have a small division or department that does RFID, okay? At that time, RFID was something that people talked about, okay? So Casey and his team, let's explore. So we bought a mobile machine. We do lamination, we do all sorts of things. But we realized that we are not good enough to do it. It also distracts us. So Casey and team say, look, we can't. So what we did was we find an RFID company who wants to go into labor market. to -- and we merged with them. We didn't take cash. We took shares. The shares in Taiwan, all right? So they operated for a while in Malaka. After a while, they also decided that Malaka is not a good place because it lacks SME support, all right? And other thing, there's no ecosystem in Malaka that supports this industry, all right? Maybe it supports other industry, but not this industry. So they moved the entire thing back to Taiwan.

I see...

Okay? And they managed to do very well. They were listed.

So you took the shares before listing.

Yes. So we are like. We have made like -- more than 10x. I mean it started as. We merged it for worth, I think, MYR 4.5 million. And then now the stake you can see.

It's still on the balance sheet...

It's worth like MYR 15 million, MYR 16 million. It's all under comprehensive income, so you don't see.

You don't see the details.

But you just look at the investment in security, [indiscernible] security, that's the one. So when we try and we are willing to admit if we can't do it.

Yes. Or you're not the best.

Yes. If we can't do it or we fail, then we will look at the exit, all right? But let us try first. Okay. But when we put on something like this, rest assured, we are not putting too much money into it.

Dipping toes in water [indiscernible].

Yes. That's not our style. Our style is [indiscernible], learn, try. If we succeed, it can grow into 20, 30x return. If we fail, then we lose some.

So Mr. Yeow, hypothetically speaking, looking into all the different associates or JV or like even subsidiaries that you have, which of them do you reckon if, let's say, you have to pick one, which of them do you think you can spin off first?

I think packaging may come first.

Spinning off the packaging.

Yes. Because packaging has grown to a size that is quite decent. We have more than MYR 400 million turnover, profit. Unfortunately, with this slowdown, our profit is probably still going to be around MYR 30 million. So it's something decent. But I always tell our boys that no point listing it when your profit is still low because there's a lot of costs associated to listing. And it doesn't mean that we are getting out, right? It just means that there's the aspiration of our partners who are top management. They would like it. They would like to see the fruit of their labor, at least there's a market price.

Marketable [indiscernible].

[indiscernible] and that kind of stuff. But from our perspective is, it's not that bad.

Yes, because I think one of the -- it is a bit difficult to value each and every one of your low discount business units, I would say. Though some of them, if we look into like their peers or whatever the market is currently valuing some of equivalent kind of like business, it could fetch good valuation and all that.

Rondy [indiscernible] was cognizant of.

Yes, exactly.

So probably 2 last questions. I have one on hospitals because it's not been brought. Yes. So probably any update on the hospital side?

We are now full steam in -- full steam ahead in terms of doing the necessary planning before we call for tender to build a hospital. Right now, our project team is working closely with the consultants, including the architect and the planner and the doctors on the layout, the equipment, the departments that we want to have, that's being sorted out right now. We are also finalizing on all the various agreements, right, the joint venture with the doctors and to start raising money from that exercise.

Understand. Understand. So, so far, there has not been any major surprises milestones?

No.

Okay. Probably one last one, Rondy, do you want to go? Because there's one group one. So...

Yes, please go ahead.

Yes. there's a group question in terms of like now with the concluded U.S. elections and Trump with his rhetoric of China sanctions, inflation rate at almost -- okay, I would say inflation has come down by quite a bit, right?

Let's see when Trump really comes in with more tariffs, whether that will be inflationary. I think it should be inflationary, right? But the geopolitical situation is something that we have got to monitor carefully.

Because there are so many segments of the business and the moving parts.

Yes. I mean you can already see the supply chain is evolving, okay, to cope with these rising geopolitical tension between the U.S. and China, right? You're already seeing Chinese moving out from China to circum granted. But then Trump is also not stupid. So you also want to we Canada and Mexico because that's where all these people invest in to get into -- so all the [indiscernible] the American free trade agreement will all collapse because Donald Trump saying, no, no, no, no, I'll still wait you 25%. I still wait you 25%. And let's see how. Because if the U.S. really want to go down that route, no matter where the Chinese go, they will still consider you as Chinese. So can you imagine if Chinese say, okay, I set up a plant in Malaysia. We are still considered Chinese. That's how the Americans look at.

Not to enforce...

That's why a lot of solar panels like Longi they make huge investment in Malaysia. They may get caught. They may get caught. Even like paper, paper -- bags, there's one Chinese player here. They also get whacked by the U.S. until antidumping. So they get [indiscernible] 20%. whereas we get [indiscernible] 3.8% It's really [indiscernible] hunting, the Americans, all right? They don't care. So the Chinese can camouflage themselves, can try -- the moment that you own, you are the target. So you can try setting up plants all over the world. Does it really stopped American from going after you? I don't know.

Understood. Understood. Yes. Okay. Just probably I'll end on this note and maybe Rondy, you can chip in your final words. Mr. Yeow, please turbo your buybacks too cheap not to take advantage, like Charlie Munger said, have to buy aggressively when opportunity presents itself. Buffett added put out a bucket, not a thimble. So I'll probably end with that. Rondy, any last words from you and...

No, I think that's all. Yes. Thanks again, Yeow. Thanks for everybody who [indiscernible].

For those questions. Thank you so much for the questions. We do apologize if we're not able to answer all of them. I think Mr. Yeow is readily available to answer. Please write into him. As Mr. Yeow mentioned in the earlier part, the slide deck has already been made available on the website. please do download it. Have a good read. And looking forward to see you guys all in the next quarter, which is next year. Yes. All right. Bye-bye, guys.

Bye.