FIGURE 1: BATU KAWAN BERHAD
LAST 2 YEARS SHARE PRICE TREND
**analysis
based on 2018 annual report.
1.
GENERAL INTRO: Batu Kawan, which holds 47%
stakes in Kuala Lumpur Kepong Berhad, which is one of the main oil palm
plantations in Malaysia.
2.
NOTABLE POINTS:
a. according
to 2018 report, apart from its 47% stakes in KLK, its own businesses include
property development, logistics and chemicals manufacturing.
b. allocated
capital expenditure for the current financial year total at RM969.68 million:
Plantation (RM693.01 million), oleochemicals manufacturing (RM210.29 million),
industrial chemicals manufacturing (RM33.63 million)
c. Overall
Plantation results decreased in FY 2018 due to lower selling prices and sales
volume, losses from the refining, crushing and trading activities, and
unrealised foreign exchange translation losses of RM85.26 million reported by
the Indonesian subsidiaries on intercompany loans and USD bank borrowings
impacted by the weakening of Indonesia Rupiah.
d. In
FY 2018, the Group’s average selling prices for CPO and PK fell by 15% and 22%
respectively from last year, as commodity prices softened on the back of high
inventories in both Malaysia and Indonesia, coupled with lacklustre global
demand, threats from the European Union’s (“EU”) proposed ban on palm oil
biodiesel, and high import duties imposed on palm products in India. The
average profit per matured hectare (after replanting) for palm oil fell by 39%
to RM4,123 from RM6,793 last year.
e. The
refining, crushing and trading operations had suffered a loss of RM34.12
million compared to a profit of RM44.59 million in FY 2017, mainly due to
negative refining margins arising from tighter supply of feedstock particularly
during the early period of FY 2018. In addition, there was a settlement of a
legal claim of RM24.38 million (or USD6.05 million) relating to a shipment
dispute between a sub-subsidiary and its customer.
3.
IS THIS COUNTER A STRONG GROWTH STOCK?
a. REVENUE
RANGE (million): ~18,966 million in 2018 annual report, this is a high revenue
company.
b. SHARE
PRICE: from 2018-2019, share price share price deceased from RM20.00 to around
RM16.00
c. EARNING
PER SHARE (EPS): earning per share in last 5 years decreased from 129.6 to 116sen
d. FUTURE
POTENTIAL/PROSPECTS: quite dependable and reliable counter, share price expected
to be stable.
e. CAPITAL
EXPENDITURE (CAPEX): spending on purchase of new fixed assets is RM 969.68
million, around 4% of total assets.
4.
IS THIS A STRONG DIVIDEND STOCK?
a. DIVIDEND
YIELD: in 2018 report, BATU KAWAN declared a total dividend payout of 55 sen
per share, amounts to dividend yield of 3.31 % based on current share price.
b. CONSISTENCY:
consistent dividend payout, last five years (2015-2019) dividends declared range
between 50 to 60 sen per share.
c. DIVIDEND
PAYOUT RATIO: in 2018 financial year, BATU KAWAN paid out about 47% of its
earnings to investors in the form of dividend. The dividend payout ratio range
from 27-47% of earnings in last five years.
5.
IS THE MANAGEMENT PERFORMANCE GOOD?
a. RETURN
ON EQUITY (ROE): in 2018 financial year, BATU KAWAN achieved a low return of
shareholders’ equity, at 7.1%. Last five years ROE range from 7 to 13%.
b. COST-TO-INCOME
RATIO: cost-to-income ratio is high at about 1385%.
6.
OTHER INDICATORS:
a. CASH
FLOW: cash flow is positive, around RM 1473 million, equivalent to RM 3.68 per
share
b.
SUPPORT BY INSTITUTIONAL INVESTORS: this counter
is very well supported by institutional investors, there are 27 institutional
investors at top 30 major shareholders list, including ARUSHA ENTERPRISE SDN
BHD (47.39%), FELDA (2.5%), insurance companies and investment funds.
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