Business

Published: Friday November 6, 2009 MYT 12:43:00 PM

OSK upbeat on QL Resources


KUALA LUMPUR: OSK Research is upbeat on QL Resources Bhd (QLR) new palm pellet project targeted to start in the 2011 financial year, said the research house on Friday.

Currently, QLR is conducting technical testing on the technology, it said, adding that the patented technology is applied to converting empty fruit bunches (EFB) into fuel grade palm pellets.

The EFB bought from palm oil mills, which has 40 per cent moisture content, are dried and pulverised into fine fibres with only 10 per cent moisture content and then compacted into pellets.

The low moisture content allows the palm pellets to burn with high combustion efficiency.

"We believe this product may potentially be a substitute for wood pellet as it produces the same amount of energy at 17.5 mega joules per kilogram (MJ/kg)," said OSK in its research report on Friday.

The palm pellets are an environmental issue related to palm oil waste, particularly palm oil mill effluent (POME), as it is the largest pollutant in Malaysia, emitting a considerable amount of methane gas into the atmosphere.

QLR took the opportunity to research on and develop palm pelletizing technology which helps achieve zero-waste in palm oil milling.

The methane emitted from POME system can be used to generate biogas power for the EFB pelletizing process.

Meanwhile, the recycling of EFB into pellets is value-adding as it produces high-quality solid biofuel for industrial and power generation co-firing, which burns more efficiently than the conventional mix of EFB, paddy husks and saw dust, it said.

So far, QLR is the only company with palm pelletizing technology which has patented the technology.

As this is still being finalised, the management has not disclosed any financial information on the business.

"Nonetheless, we believe this is a potential catalyst for QLR as we can see the biomass pellet business is flourishing, especially in Europe, with projected eight million tonnes in 2008," it said.

According to International Energy Agency Bioenergy, total European consumption of wood pellet stood at 5.5 million tonnes in 2006, while production was only 4.5 million tonnes.

As palm pellets can produce a similar amount of energy, there is market potential for palm pellet as a substitute to wood pellets in Europe, it said.

Furthermore, palm pellet is cheaper to produce as it is converted from waste compared with wood pellet, which uses non-renewable sources and wood by-products such as bark, which has higher moisture content, which may affect the quality of wood pellets.

"However, we think the local demand is not ready for the technology as yet given that the conventional mix of EFB, paddy husks and saw dust is still more economical and easily available locally," it noted.

Therefore, OSK said it is maintaining QLR's earnings for 2010 and 2011 financial year as it did not see any near term contribution from this venture.

However, QLR deserves a better valuation for strong management and future earnings potential in all three of its divisions.

Hence, it is raising the target price to RM4.43 from RM3.83 previously. - Bernama


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