FIGURE 1: UNITED
PLANTATIONS BERHAD LAST 2 YEARS SHARE PRICE TREND
**analysis
based on 2018 annual report.
1.
GENERAL INTRO: United Plantations is one of the
main oil palm plantations in Malaysia.
2.
NOTABLE POINTS:
a. from
2018 report, stated that its total cultivated land banks covers approximately
50,000ha spread over Malaysia (80%) and Indonesia (20%) and is supported by
6,508 employees across the Group.
b. announce
that having acquired Pinehill Plantations Estates (3,642 Ha) for RM414 million
c. overall
United Plantations achieve a good production efficiency whereby its Crude Palm
Oil (CPO) average yield per hectare is 5.71 MT, which is much higher the Malaysian
National CPO yield (3.42 MT/Hectare)
d. United
Plantations also involves in coconut trees cultivation, in the present year
produced ~RM71 million nuts
e. main
conditions that affect the oil palm industry is on the crude palm oil (CPO)
prices, which in turn is affected by whether there is an oversupply of CPO
stocks itself, as well as prices/supply of competitive products such as soya
bean oil, also, decline of mineral oil prices also adversely affect the
financial feasibility of using palm oil products in the biodiesel industry.
Furthermore, higher import duties imposed by countries such as India are also
crucial factors
f.
other risk factors include rising labour cost
and other input costs as well as weather conditions. Occurrence of drought
causes shortage of water that is needed for the cultivation of oil palm. On the
other hand, heavy raining and flooding are also harmful to oil palm trees.
g. government
supports by removing export duty at times to stabilize the prices
h. in
terms of coconuts cultivations, the industry faces competition from cheaper
coconuts imported from Indonesia, which seriously affected UP's profitability
3.
IS THIS COUNTER A STRONG GROWTH STOCK?
a. REVENUE
RANGE (million): ~1305.5 million in 2018 annual report, this is a high revenue
company.
b. SHARE
PRICE: from 2018-2019, share price share price decreasing from around RM28.00
to around RM26.00
c. EARNING
PER SHARE (EPS): earning per share in last 5 years increased from 134 to 179sen
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 120.7
million, around 4% of total assets.
4.
IS THIS A STRONG DIVIDEND STOCK?
a. DIVIDEND
YIELD: in 2018 report, UNITED PLANTATIONS declared a total dividend payout of 140
sen per share, amounts to dividend yield of 5.32 % based on current share price.
b. CONSISTENCY:
consistent dividend payout, last five years (2015-2019) dividends declared range
between 100 to 165 sen per share.
c. DIVIDEND
PAYOUT RATIO: in 2018 financial year, UNITED PLANTATIONS paid out about 79% of
its earnings to investors in the form of dividend. The dividend payout ratio is
constant at around 70-80% of earnings in last five years.
5.
IS THE MANAGEMENT PERFORMANCE GOOD?
a. RETURN
ON EQUITY (ROE): in 2018 financial year, UNITED PLANTATIONS achieved a reasonable
return of shareholders’ equity, at 14.45%. Last five years ROE range from 13 to
15%.
b. COST-TO-INCOME
RATIO: cost-to-income ratio is high at about 165%.
6.
OTHER INDICATORS:
a. CASH
FLOW: cash flow is positive, around RM 151.1 million, equivalent to RM 0.73 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 EPF (13.48%),
SKIM AMANAH SAHAM MALAYSIA (5.17%), PERBADANAN PEMBANGUNAN PERTANIAN NEGERI
PERAK (6.29%), MAXIMUM VISTA SDN BHD (43.12%), UNITED INTERNATIONAL ENTERPRISES
LIMITED (4.18%), insurance companies and investment funds.
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