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When thinking of investments, common plans on most people’s minds would be stocks, fixed deposits, mutual funds, and perhaps crypto and NFTs.
But have you ever thought of investing in durians?
The global durian fruit market size was estimated at US$18.72 billion in 2019. It is expected to gain a compounded annual growth rate of 7.2% to reach US$30 billion by 2025. In Malaysia alone, durian production levels have hit 341 million kg across 182,216 acres nationwide, according to Grand View Research.
The price of durians is hefty as well, and Musang Kings are expected to cost no less than RM60/kg this year. Today, durians are one of the most profitable fruits for farmers and exporters.
Based on this data, having a share in the profits of durians seems like a worthy investment. And that’s what Durian Capital Berhad (Durian Capital) enables you to do. But is it all as good as it sounds?
Intrigued but skeptical, we interviewed Durian Capital’s CEO, Afiq Johar (AJ), and Managing Director, Dr. Vijay Pillai.
1. Who’s behind this?
CEO Afiq Johar has dabbled in the finance, business consulting, and startup ecosystem in Malaysia. His LinkedIn profile lists former roles as a Management Consultant at Bain & Company, and advisory positions at Grab and Astana International Financial Centre. He was also an Executive Director at MaGIC between the years 2016-2018.
Meanwhile, Managing Director, Dr. Vijay has actively involved himself in the family’s agriculture business from a young age. While working with his father, he envisioned diversifying the family’s agro-business from a mono-crop plantation to a multi-crop plantation.
Durian Capital appears to be part of Dr. Vijay’s family business, which has existing operations in the agriculture sector planting.
The overarching goal is to grow and expand the family’s land bank. They will do so by tapping into existing, unproductive plantation farms and converting them into high-yielding and economically competitive agricultural commodities like Musang King.
“Durian Capital aims to solve the issue of unregulated investment instruments for durians, while serving as a vehicle to allow more foreign direct investments into the agriculture landscape in Malaysia in a more legitimate and modern way,” the team summed up.
2. Is the scheme licensed?
Durian Capital is claimed to be the first licensed durian investment company in Malaysia, regulated under the Interest Scheme Act 2016 by Suruhanjaya Syarikat Malaysia (SSM).
Briefly checking on Malaysia’s Securities Commission (SC) and Bank Negara Malaysia’s (BNM) lists of approved investment schemes, we could not find Durian Capital on them.
After cross-checking with Durian Capital’s team, they stated, “We are not regulated under the Securities Commission, but instead by SSM as we are not offering securities or equity to the public.”
The team elaborated, “The regulatory approval process is perhaps similar in the sense that we had to undergo detailed due diligence on both our plantation and our business plan.”
3. How does the durian investment scheme work?
Located in Jempol, Negeri Sembilan, Durian Capital has allocated 200 acres to plant 8,000 Musang King trees for the purpose of its investment scheme. The scheme will be assisted by an experienced agriculture team, and best practices for durian cultivation as well as modern agritech will be used to optimise the yield.
The scheme is structured with a 15-year tenure, and each investment unit (AKA, each durian tree) is priced at RM10,000. Meaning that investing in a tree requires an RM10,000 capital. Once that’s done, you’ll receive your returns in yearly payouts over 15 years.
5. What are my returns?
Durian Capital claims investors can see 7x ROI and 13.9% compounded annualised returns. They are calculated based on the total or cumulative investor returns over 15 years, broken down into a few parts.
For the first four years of the scheme, investors will receive a guaranteed 3% interim yield funded by the company’s supplementary crop programmes. They primarily involve the papaya, banana, and jackfruit crops.
Did you know: An interim yield is typically one of two dividends given out by a company that is providing shareholders with income on a semi-annual basis.Investopedia
“In Year 5, we are expecting the first harvest of our durian trees. Investors will either receive a 30% share of revenue, or the 3% interim yield, whichever is higher,” Dr. Vijay told Vulcan Post.
“From Year 6 to Year 15 (when the trees are productive), investors will receive a 30% share of revenue, and at the end of the scheme (Year 15), there is also a guaranteed buy-back of the investor’s initial capital.”
What that means is, once the scheme is over after the 15th year, investors can opt to have their initial RM10,000 capital returned to them.
6. How many durians will the trees bear?
To be conservative, the Durian Capital team is expecting one harvest per year, with a slight incremental increase leading up to its fifth year of fruiting.
“By the fifth year of fruiting, or Year 10 of the Scheme, we assume full maturity of our trees. This means the trees are producing fruits at optimal capacity and we are projecting yearly revenue of upwards of RM100 million across 200 acres for an estimate of about 150 fruits per year,” AJ calculated.
Do note that these estimates are not definitive, as the Musang King industry is relatively new and largely informal, so there are no concrete benchmarks publicly available, stated AJ.
7. Can I invest in more than one tree?
The trees, AKA the “interest units”, promise returns based on the future harvest of the Musang King plantation. Hence, there is no maximum cap as to how many units an investor decides to purchase for themself or their company.
“One of the key benefits of structuring our scheme according to the Interest Scheme Act is that we are able to distribute returns more equitably,” AJ and Dr. Vijay added. “For example, there may be differences in yield between individual trees which cannot be controlled.”
Thus, although Durian Capital has a total of 8,000 trees up for grabs, only 5,600 trees are offered as interest units for now. Durian Capital is keeping 30% of its trees in reserve as replacements in the event the investment units fail to bear fruit.
Durian Capital will consider launching additional investment schemes if the demand outweighs the supply.
8. Can I renew my investment plan after the tenure ends?
AJ actually discourages investors from doing so.
“Once the Durian Capital Scheme ends, the scheme will not be extended and investors will not be able to repurchase or rejoin,” he said.
Our Durian Capital Scheme has been structured for 15 years and as we are regulated under the Interest Scheme Act, we are not able to extend this tenure. This is our first scheme, and in the future, we may consider launching additional investment schemes based on our business requirements at the time.Durian Capital’s team
If all goes according to plan, Durian Capital’s mission could be a game-changer in the long run. It democratises agriculture investing and allows the public access to the agricultural industry which is usually dominated by large corporations and private entities.
This scheme could eventually pave the way for more investment opportunities, perhaps for other local fruits and vegetables we can proudly call Malaysian.
Featured Image Credit: Durian Capital Berhad