tdm in expansion drive

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INDIVIDUAL ASSIGNMENT

News Title: TDM on expansion drive

Source: New Straits Times, Wednesday 13/02/2013

SUMMARY

TDM Berhad is in the mission of expansion in this year, allocating RM415 million for capital

expenditure, 60 percent for plantation business and remaining for healthcare businesses.

TDM expansion activities double up in Kalimantan Indonesia from 9000 hectare to 17 000

hectare and setup a 60 tonne mill for operating huge capacity of palm oil production. TDM

focus in Kalimantan area as starting cost is high, TDM balanced approach to simultaneously

pay hefty dividend, create growth and improve cash reserve. For TDM healthcare businesses,

they focus on build more floor space as the demand for private healthcare is growing rapidly.

TDM will provide more cutting edge equipment as well as staff and doctor. TDM expect

from the injection of fund, it will help in improving the services, improve the quality of

service and offering. TDM plan to rebrand its hospital in Taman Desa Kuala Lumpur as

positioning strategy. Once the refurbishment complete, it will run under TDM brand. In

future, TDM hope to find bigger place to relocate their hospital in Kelana Jaya to serve better

service. TDM healthcare group plans to triple the size of its healthcare business to become 3 rd

largest listed healthcare in Malaysia.

COMPANY PROFILE

TDM Berhad was formed in 1965 and was listed on Bursa Malaysia in 1969. The company is

presently listed on the Main Market of Bursa Malaysia. TDM Group's core businesses are in

palm oil plantation and healthcare. The Group's plantation division is involved in the

development and management of palm oil plantations and in the processing of crude palm oil

and palm kernel. The division currently manages approximately 37,000 hectares of palm oil

plantations and owns two palm oil mills in Terengganu. In 2007, the Group ventured into the

setting-up of palm oil plantations in Kalimantan, Indonesia. The Group's healthcare division

operates four specialist hospitals, namely the Kelana Jaya Medical Centre in Petaling Jaya,

Selangor, Taman Desa Medical Centre off Jalan Kelang Lama, Kuala Lumpur, Kuantan

Medical Centre in Kuantan, Pahang, and Kuala Terengganu Specialist Hospital in Kuala

Terengganu, Terengganu.


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The Mission

TDM shall endeavour to fulfil its role as a responsible corporate citizen and enhancer of

wealth

for its shareholders.

The Tools

Integrity, Transparency, Diligence, Professionalism, Passion, Care

Integrity

At TDM, we believe that each person is accountable to deliver on the highest standards of

behaviour. Respect, honesty, trustworthiness and teamwork are the foundation to our

relationships with our customers, shareowners, vendors, the community and each other.

Transparency

we commit to being open, honest, timely and accountable in all of our transactions. Our team

will provide clear and responsible reporting.

Diligence

We will work with urgency and commitment to be successful. We will strive for excellence

and quality in everything we do and support each other to achieve our results.

Professionalism

Each of us is fully accountable for our work and for delivering it in a professional and

friendly manner. We take pride and ownership in all that we do and say and commit to

improving on our own performance.

Passion

We are passionate about our business and the desire to be the best. We show pride and

enthusiasm in our work, our company and each other.

Care

our culture is built on respect for People, Planet & Profit. We honour our relationships with

all which we interact with and seek ways to protect and nourish those relationships as well as

achieve sustainable results for our shareholders.

The Aspiration

These virtues shall form the basis with which the TDM group shall excel in its mission to be

the best in both of its commercial and social roles for the benefit of the shareholder,

employees and the nation.


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TDM BERHAD BUSINESS FOCUS

a) Plantation DivisionTDM Plantation Division is involved in the cultivation of oil palm and the processing and

trading of palm oil and related products. The division manages 12 oil palm estates on 37,000

hectares, with planted hectares of 32,709 hectares, 95% of the planted hectares is matured

plantation and the balance has been fully replanted. Our next replanting, scheduled to start in

5 years time, will be paced at a constant 5% of the area per annum. Meanwhile, over the next

few years, the division will reap the reward of its earlier investment without incurring any

replanting cost. This division owns two palm oil mills with an annual processing capacity of

600,000 metric tonnes of fresh fruit bunch ("FFB"). These mills are dedicated to milling theharvest from our own plantations. Both mills have been refurbished and upgraded in 2007

and 2008 enabling the Group to enjoy higher throughput at a lower operational cost. In the

estates, we have introduced the latest agronomic advances in oil palm cultivation

concentrating on the best sustainable pratices in estate management including effcient use of

water and nutrients, and stricter harvesting and processing routines. The aim of our

agronomic programmes is to continuously improve production yields and profitability.

b) Healthcare DivisionHealthcare Division operates four medium sized specialist hospitals. These are Kelana Jaya

Medical Centre ("KJMC"), Taman Desa Medical Centre ("TDMC") in Selangor; Kuantan

Medical Centre ("KMC") in Pahang; and Kuala Terengganu Specialist Hospital ("KTS") in

Terengganu. We position our hospitals as secondary community hospitals that provide

quality and affordable healthcare service to the neighbouring and surrounding communities.

The immediate goal of this division is to further strengthen its footprint in the East Coastregion.

TDM CURRENT ANALYSIS BY


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BURSA MALAYSIA

Bursa Malaysia comes out with the analysias for TDM Berhad for year ending 2012, the

result shows that TDM doing well in overall competitiveness internal and externally. The

most valuable information is the profitability of the company which rank 10/10 which

indicate good business activities. The financial health also scares perfect 5/5 which indicates

good financial management from TDM. Based on the current situation, TDM is in the Cash

Cow quadrant in BCG matrix, the expansion on future business growth and sustainability is a

must for TDM to stay competitive in the industry.

TDM Strategies

Resource positioning

TDM currently expand their palm oil plantation in Kalimantan Indonesia. They target 17000

hectare by the year end on 2013. Currently they have 9000 hectare in running operation and

harvesting. TDM focus for the next step in acquisition of new land for their palm oil project

as the old land is in the optimum level of production, resource positioning needed for future

survival of the business.

Market/Product positioning

Another strategy that TDM used in their business activities is the market and product

positioning, getting closer to the community is their purpose in giving back for good. TDM

always position itself as a good business to be invested in and also taking care of the

community by venturing into healthcare industry. Providing such services to the nation givesTDM a competitive advantage as it still a company under Terengganu state government

supervision. In strengthening their market, TDM invest more in expanding the plantation

facilities to 60tonne mill in Kalimantan as the expansion of sites and will be fully operated in

2015. This will positively contributes to the increasing growth of earnings and profitability.


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Innovation positioning

Innovation is one of the criteria that shows one company is competitive enough in sustaining

the market share their gain, TDM use innovation as they an important key to enhance their

business practice. In TDM health care business, they striving to get 130 new beds in Kuala

Terengganu Specialist Hospital, and equipped with new medical machinery, refurbishment of

the old image and health care offering and services.2014 will be their new 150 beds Kuantan

Medical Centre completion period and will be operating in the same year and positioning

itself as a secondary healthcare provider after government hospital.

TDM CURRENT ISSUE

Current problem faced by TDM is to setup a new mill for the new expansion of their palm oil

plantation in Kalimantan; they need to double the production capacity, machinery, labour and

expertise as they double up the plantation sites. TDM need financially strong investor to

generate capital and expertise. TDM also face the problems with law and regulation in

Kalimantan where they need to protect the wild life reservation area. Expanding more

plantation area will result in deforestation; it will result in land and water pollutions. For

TDM healthcare services, their facing problems in cutting edge medical facilities such as

medical machineries, services offer and expertise in critical area. The problems bring

disadvantage in competing with others private hospital that equipped with new and improve

medical technology and practice. Based on the problems, TDM currently do not have to

restructure their management as they are fully subsidized by Terengganu State Government,

any decision in restructuring, joint venture of acquisition of other company based on the

decision made by government. For the long run, if TDM berhad become private company, its

should join venture with Malaysia biggest player in palm oil industry such as Sime Darby

plantation and IOI plantation group to be able to expand more and earn more in the future.

For TDM healthcare business, become the 3rd largest healthcare provider in Malaysia is not

enough for future, in long term, expanding more branches and introducing new services is a

must to stay competitive in the critical industry.

TDM PLANTATION COMPETITIVE CONDITIONS (5 FORCES MODEL)

TDM Plantation competitive conditions in Kalimantan are facing huge competition among

biggest palm oil company. The threat of competitor is PT Astra Agro Lestari, R.E.A HoldingsPlc and Kuala Lumpur Kepong Bhd (KLK) which have much bigger plantation area and


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plantation mills in Kalimantan. The threats of substitute product for TDM are mainly from

canola oil, Sunflower oil and Olive oil which offer much healthier than palm oil based

product. For threats of new entrance, operating in Kalimantan have different competitive

environment compare to Malaysia, TDM need to compete with Indonesian based palm oil

company that have the biggest plantation sites and many small subsidiaries company that

compete in the acquisition of land and mill. For the threats of bargaining power of supplier,

TDM have cheap labor for their plantation operations, supply of labor is not a problem for

TDM as many Indonesian are exposed to the palm oil plantation skills and willing to work for

low payment. For bargaining power of buyer, the market for palm oil product is big not only

local but also international, palm oil based product can be in variety of form, food, cosmetic,

fertilizer and bio fuel. The potential buyer is high; it can be in form of business to business

and business to consumer products all around the world. Based on the competitive condition,

TDM have a bright future to expand its plantation businesses in Kalimantan and to a good

competitor for the existing company that compete in the same area as well. TDM should be

worry about strategic partnership with Malaysian based company such as Kuala Lumpur

Kepong Bhd in Kalimantan which is no 3 biggest plantation sites there. The strategic alliance

will help Malaysian based company to stay strong in Kalimantan Indonesia as the competing

company develop small sub company to compete with new entrance.

CONCLUSION

TDM Berhad is performing well in plantation and healthcare industries based on the analysis

done by Bursa Malaysia, TDM is a very competitive company and have a very good

management. Even though TDM doesnt have any rank in Kalimantan palm oil industry, but

as a foreign company and can survive for such a long period and able to expand more

plantation site its a good start for TDM. In a healthcare industry, TDM aim to be the

secondary health service provider after government hospital to serve to the community in

needs for such services. The mission to be the 3rd biggest healthcare service provider in

Malaysia shows TDM is serious in business that their venture in.

tdm in expansion drive

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