Food security is a big topic of discussion at present, especially amid the Covid-19 pandemic and with growing awareness about environmental, social and governance (ESG) issues. Governments worldwide are going all out to ensure food supplies remain secure if another pandemic were to break out while companies are jumping on the food security bandwagon to capture a slice of the business. However, one company that had started looking into the issue of food sustainability even before the pandemic made the headlines is property and agriculture developer Hong Lai Huat.
In an interview with The Edge Singapore, Dylan Ong, group general manager and executive director of Hong Lai Huat, says, “We started planning our agriculture hub (agri-hub) several years ago. Back then, there was not much talk on food security and support in our development of a 10,000ha farmland in Cambodia into an agriculture hub. But then Covid-19 happened and our plans were expedited and governments started becoming more interested in what we were doing.”
Hong Lai Huat plans to develop its 10,000ha Cambodia-Singapore agriculture hub in three phases. The first phase, which will start at the end of the year until 2024, will see improvements in network, electricity and water supply infrastructure. This will see the construction of infrastructures such as a solar farm, warehouses, cold chain facility and food processing factories. Some land has also been set aside for the mining of granite and marble.
In the second phase from 2025 to 2035, the agri-hub will see further development to include facilities for aquaculture, fisheries, plantations and commercial farm resorts.
In phase three from 2036 and beyond, the group will start to focus on community living within the land parcel and start to develop commercial and living quarters.
“We want to tell the whole world that whoever wants to build their food-processing factories or any other development that contributes to food security in Cambodia can work with us. Here, we can offer the land and jointly cooperate with other companies to play a big role in helping countries in the Asean region to achieve sustainable and reliable food security,” adds Ong.
Ong explains that his father Johnny founded Hong Lai Huat at the mere age of 11 years old, using Johnny's mother's name to start up the company. At that time, it did very basic construction work such as digging up toilet holes. Eventually, Johnny found his way around the industry and learned the know-hows of larger repair and renovation works, which opened up opportunities for several small scale projects.
As Johnny put all his effort into building the company and learning more about the trade, the projects he undertook became larger, eventually turning the company into a real estate and property developer. Some of its notable developments in Singapore include D’Ecosia, D’Fresco, D’Castilia, D’Almira, D’Lithium, D’Kranji Farm Resort and D’Centennial.
Finally, the group diversified into the agriculture sector in Cambodia in 2008. Thirteen years later, the group has completed the development of a 10,000ha farmland that cultivates fresh cassava as well as a cassava starch production factory capable of producing 120 tons of starch daily. The company has also expanded its property development capabilities into Cambodia with several residential and commercial projects.
Seeking a sustainable and recessionproof business
To properly focus on the development of its new 10,000ha agri-hub, Hong Lai Huat sold its last development in Singapore – D’Kranji Farm Resort – to master tenant Gallop Green.
However, D’Kranji Farm Resort may not yet be the last project Singapore has seen. “Right now, we are telling people that we are exiting the Singapore market but we will continue to be on the lookout for potential opportunities. Rather than acquire land parcels like we previously did, we will likely look for potential joint venture partnerships,” says Ong.
When Hong Lai Huat first entered the agriculture sector in Cambodia back in 2008, all Ong had in mind was to diversify into a business that was sustainable and recession-proof. That was because the world was in the throes of the Global Financial Crisis, which forced the group’s property business to a juddering halt.
“To safeguard the company against any such future crisis, my dad decided to enter the agriculture industry, supported by the company’s stakeholders and board of directors. While the agribusiness requires heavy investments and has a long project development runway, it is still a business that can generate sustainable returns during a crisis. After all, people still need to eat, crisis or not,” explains Ong.
Asked why Cambodia was chosen as the base of its agri hub, Ong says his father went to Indonesia, Myanmar and Laos but was unable to find a big enough land parcel that met his expectations. It was only in the first quarter of 2008 that he met with a Cambodian military general in Singapore, who invited him to take a look at his country.
Besides finding a suitable land parcel that helped the group make its decision, “the Cambodian government is friendly to foreign investors and their policies were attractive to us,” says Ong, adding that there is hardly any currency control in the country while the government offers nine tax-free years the import and export of all agriculture production.
Since its foray into Cambodia, Hong Lai Huat has developed two development properties, with one more still in development. It has also already sold a 450ha agricultural land and reinvested the profits.
At the moment, the group is focused on its ongoing property developments — D’Seaview, which is about 85% sold; Royal Platinum, which is about 15% sold and set to be completed in August 2023; and D’Clover, which does not have a launch date yet — as well as its 10,000ha Cambodia-Singapore agriculture hub.
Pummelled by Covid-19
Hong Lai Huat was listed on the Mainboard in 2000. As at Aug 24, shares in Hong Lai Huat are trading at 9.5 cents, some 5% lower year to date. To be sure, the company’s earnings track record has not been awfully exciting. In the latest FY2020 ended December, Hong Lai Huat recorded a loss of $8.5 million, compared to earnings of $1.8 million in FY2019. This was on the back of a 73% y-o-y fall in revenue to $8.0 million in FY2020.
Like many other companies, Hong Lai Huat was badly affected by the Covid-19 pandemic as the group was unable to recognise its development project revenue for FY2020.
“When Covid-19 happened, many of our overseas buyers could not make the trip to Cambodia. Right now, we have a few hundred boxes of house keys in the office just collecting dust because the homeowners cannot come and collect them,” says Ong, who adds that revenue is only recognised after the group has transferred the unit’s title over to the homeowner.
Furthermore, with cross-border travel restrictions still in place, selling the balance unsold units to foreigners now is a big challenge. “Without people travelling to Cambodia, we have lost another potential source of buyers,” says Ong.
However, with vaccination programmes being progressively rolled out worldwide and travel bubbles being discussed among countries, Ong is hoping it can register progressive sales from the two developments in the coming 12 months. The group will also be actively leasing its completed properties to gain recurring income while working to lease out space in its agri-hub.
On the outlook, Ong explains, “We spent about US$24 million ($32.7 million) in September last year to purchase a piece of land in Phnom Penh, which we intend to develop the largest mixed-develop project we have undertaken so far in Cambodia. This property will see about 1,900 units.”
This project called D’Clover spans about 100,423 sqm and for now, has no confirmed launch date although the group may announce one when the outlook on the pandemic is clearer. However, Ong is more confident about this project as it is meant to target the “affordable market” of younger married couples and more locals.
“And as for our agri-hub, it is a long-term investment that will span more than 20 years,” says Ong. The group will be continuously working on this project alongside its property developments in the other areas in Cambodia.
Nevertheless, the group’s goal remains the same whether for properties or farms: they will be sold off in the end. “In every investment that we have made in Cambodia, be it in property or agriculture, our goal is to develop, operate and sell. This is what other developers will do too,” says Ong.
Ong is also unfazed by Cambodia’s unstable political climate and believes it will not affect its business there. “Compared to last time when we first went into the country, politically it has been much more secure and strong now. The current government have also rolled out friendly policies for foreign investors, which is very helpful,” he adds.
Photo: The Edge Singapore/ Albert Chua
