COMMENTS ON SARAWAK OIL PALMS BERHAD (5126)

FIGURE 1: SARAWAK OIL PALMS BERHAD LAST 5 YEARS SHARE PRICE TREND

**analysis based on 2018 annual report.

1.       GENERAL INTRO: SARAWAK OIL PALMS (SOP) is one of the main oil palm plantations in Malaysia.

2.       NOTABLE POINTS:

a.       In 2018 report, the Group's core businesses remained as upstream (oil palm plantation and milling) and downstream (refining, trading and marketing of palm oil products) segments.

b.      within the downstream segment, the group is operating refining and fractionation plants as well as a biodiesel plant. In addition, its newly built phytonutrient plant has received certifications from relevant authorities to manufacture and market pharmaceutical and consumer healthcare products.

c.       a decrease of earnings in the 2018 financial year compared to the previous year was attributed to lower selling price of palm products and increasing operating expenses.

3.       IS THIS COUNTER A STRONG GROWTH STOCK? 

a.       REVENUE RANGE (million): ~3603.8 million in 2018 annual report, this is a high revenue company.

b.      SHARE PRICE: from 2015-2019, share price decreasing from around RM5.00 to RM2.00. By end of 2019, price shoots up to around RM3.50

c.       EARNING PER SHARE (EPS): earning per share in last 5 years fluctuated from 10.9 to 40.8sen

d.      FUTURE POTENTIAL/PROSPECTS: share price expect to remain steady in the next few years

e.      CAPITAL EXPENDITURE (CAPEX): spending on purchase of new fixed assets is RM 144.6 million, around 3% of total assets.

4.       IS THIS A STRONG DIVIDEND STOCK?     

a.       DIVIDEND YIELD: in 2018 financial year, SOP declared a dividend payout of 6 sen per share to shareholders despite making losses. The dividend yield amounts to 1.66% only.

b.      CONSISTENCY: consistent dividend payout, last five years (2014-2018) dividends declared range between 5 to 6 sen per share.

c.       DIVIDEND PAYOUT RATIO: in 2018 financial year, SOP paid out ~55% of its earnings to shareholders in the form of dividends.

5.       IS THE MANAGEMENT PERFORMANCE GOOD?

a.       RETURN ON EQUITY (ROE): in 2018 financial year, SOP achieved a low return of shareholders’ equity, at 3%.

b.      COST-TO-INCOME RATIO: cost-to-income ratio is high at about 3209%. Means that ~RM32 of costs is needed for every RM1 earned.

6.       OTHER INDICATORS:

a.       CASH FLOW: cash flow is positive, around RM 647.2 million, equivalent to RM 1.13 per share

b.      SUPPORT BY INSTITUTIONAL INVESTORS: this counter is well supported by institutional investors, there are 21 institutional investors at top 30 major shareholders list, including insurance companies and investment funds. Its major shareholders are SHIN YANG PLANTATION SDN BHD (28.51%), PELITA HOLDINGS SDN BHD (20.25%) and TAN SRI DATUK LING CHIONG HO (7.01%).

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