Malaysia plantations sector is of great interests to investors due to its potential growth and profitability, as Malaysia is one of the largest supplier of oil palm products in the world. Likewise, oil palm is known to be the most efficient oil producing crop compared to other crops such as soy bean. Being located at the tropical region, Malaysia has the natural climate advantage that enables oil palms to be cultivated in large scale.
Below
is a comparison of all 44 of the oil palm plantation counters listed in Bursa
Malaysia, in terms of earnings, dividend return and efficiency of the
management. Scores are assigned to each indicator and added up together to
obtain an overall performance score for each counter, which gives an indication
of the plantation counters most worthy to invest in.
SECTION
1 – CURRENT EARNINGS, SHARE PRICE AND PRICE TO EARNING (P/E) RATIO
In
terms of share price and earning per share, KLK, UNITED PLANTATIONS and BATU
KAWAN are the top three performers. As shown by the five-year earning per share
trend, most counters earnings remain steady from year 2015 to 2019. Most
counters with good earnings show a P/E ratio above 15, which indicates that
they are relatively expensive to invest in.
SECTION 2 – DIVIDEND PER SHARE, DIVIDEND YIELD AND
DIVIDEND PAYOUT RATIO
Dividend
payout by listed companies to shareholders is an additional return of
investment to shareholders in addition to the increase of share values.
Generous dividend payout to shareholders will attract more investors to invest
in the counter.
UNITED
PLANTATIONS paid the highest dividend per share in the latest financial year,
which amounts to a dividend yield of more than 6%. Most plantation counters
dividend yields are less than 3%, which make them less attractive to invest in.
Also notable that plantation counters such as KLK, UNITED PLANTATION, IOI, BATU
KAWAN AND GENTING are among the most generous in dividend payout, whereby they
paid out more than 70% of their earnings in the latest financial year.
SECTION
3 – PERFORMANCE OF THE MANAGEMENT TEAM
The
long term success and profitability of the plantations counters will
depend of the efficiency and smart strategies of the companies’ management
team. Some of the indicators offer some ideas on the strength of the management
teams.
Among
the plantation counters investigated, some of the better performing counters
(e.g. KLK, UNITED PLANTATION, IOI AND BATU KAWAN) posted a return on equity
that range from 5-10%, meaning these counters are earning more profit per unit
of capital provided by the shareholders. It expected that the ROE of plantation
counters will increase in the coming quarters since CPO prices has raised above
RM 3,000 per MT recently.
Also
it is important that plantation counters have the lowest possible cost-to-income
ratio, meaning it is able to control operational cost to the lowest level.
Plantation counters generally incur high operational costs such a labour cost,
fertilizer cost, re-planting cost and so on. Well-managed counters employ
strategies such as increasing mechanization of the harvesting process (to
reduce reliance on human labour), planting good quality oil palm trees with
high yield, incorporate biomass and biogas plants (to convert waste materials
into energy) and so on to reduce cost and improve earnings. Ideally the
cost-to-income ratio should be controlled to below 1000 to improve
profitability of the operations.
Capital
expenditure is important for the plantation counters in three aspects. Firstly,
the investment into machineries to improve the efficiency of harvesting and
milling of the fresh fruit bunches. Secondly, investment into re-planting areas
with old oil palms trees with young palm, to ensure the plantations are always
having a high percentage of mature oil palms which have the highest yield.
Finally, plantation management always endeavor to identify and purchase
suitable land banks to expand the plantation areas. Overall, most of the well-performing
plantation counters have significant capex spending in order to maintain the
plantation efficiencies at the most optimum level. This is important for the
future developments of the companies.
SECTION
4 – CASH AND ASSETS VALUES
Sufficient
amounts of assets and cash are important for security of the companies in case
any emergency situations happen. According to below graphs, it is shown that most
of the companies investigated are well-supported by sufficient amount of
assets, such as net tangible assets (NTA), market capital and cash flows. So,
overall these counters are safe to invest in.
SECTION
5 – MARKET CONFIDENCE ON THE COUNTERS
Overall,
there is great interest to invest in the plantation counters, which is shown by
the number of shareholders and daily trading volume. Also noted most of the top
plantation counters are well supported by institutional investors such as EPF,
foreign and local investments funds and insurance companies.
SECTION
6 – OVERALL PERFORMANCE AND SCORING OF THE PLANTATION COUNTERS
Each
of the investigated plantation counters are assigned a score based on the above
indicators. For each indicator, the best performing counter is given score 44,
the second best performing counter is given score 43 and so on. The total score
for each counter is added up to give an overall performance score of each
counter. According to the below graph, overall top 8 best performing counters
are KLK, UNITED PLANTATION, IOI CORP, BATU KAWAN, GENTING PLANTATIONS, SIME
DARBY, SARAWAK OIL and UNITED MALACCA, respectively. In conclusion to the above
analysis, these are the eight counters most recommended to invest in the plantations
sector.
NOTES:
**DATA BASED ON ROLLING 4 QUARTERS AS OF 15/1/2020 AND THE LATEST
PUBLISHED FINANCIAL REPORTS.
VOL: VOLUME, EPS: EARNING PER SHARE, NTA: NET TANGIBLE ASSET PER SHARE,
DPS: DIVIDEND PER SHARE,
P/E: PRICE EARNING RATIO, ROE: RETURN ON EQUITY, DY: DIVIDEND YIELD, DPR:
DIVIDEND PAYOUT RATIO
Feel
free to “Like” or “Follow” my Facebook Page (大马股市分析 Malaysia Stock Analysis, https://www.facebook.com/%E5%A4%A7%E9%A9%AC%E8%82%A1%E5%B8%82%E5%88%86%E6%9E%90-Malaysia-Stock-Analysis-100684328044058
) to receive latest updates on new articles.
Latest
analysis reports of individual plantation counters:
1.
KUALA LUMPUR KEPONG BHD
2.
UNITED PLANTATION BERHAD
3.
IOI CORP BHD
4.
BATU KAWAN BHD
5.
GENTING PLANTATIONS BHD
6.
SIME DARBY PLANTATION BERHAD
7.
SARAWAK OIL PALMS BHD
8.
UNITED MALACCA BHD
9.
CHIN TEK PLANTATIONS BHD
10.
KIM LOONG RESOURCES BHD
11.
TA ANN HOLDINGS BHD
12.
TSH RESOURCES BHD
13.
IJM PLANTATIONS BHD
14.
DUTALAND BHD
15.
FELDA GLOBAL VENTURES HOLDINGS BHD
16.
BOUSTEAD PLANTATIONS BHD
17.
HAP SENG PLANTATIONS HOLDINGS BHD
18.
SARAWAK PLANTATION BHD
19.
FAR EAST HOLDINGS BHD
20.
RIVERVIEW RUBBER ESTATES BHD
21.
KLUANG RUBBER CO MALAYA BHD
22.
MATANG BHD
23.
INNOPRISE PLANTATIONS BHD
24.
PINEHILL PACIFIC BHD
25.
BLD PLANTATION BHD
26.
JAYA TIASA HOLDINGS BHD
27.
TH PLANTATIONS BHD
28.
NEGRI SEMBILAN OIL PALMS BHD
29.
TDM BHD
30.
CEPATWAWASAN GROUP BHD
31.
RIMBUNAN SAWIT BHD
32.
MHC PLANTATIONS BHD
33.
GOPENG BHD
34.
INCH KENNETH KAJANG RUBBER PLC
35.
KRETAM HOLDINGS BHD
36.
SUNGEI BAGAN RUBBER CO (MALAYA) BHD
37.
GOLDEN LAND BHD
38.
KWANTAS CORP BHD
39.
HARN LEN CORP BHD
40.
NPC RESOURCES BHD
41.
PLS PLANTATIONS BHD
42.
ASTRAL ASIA BERHAD
43.
MALPAC HOLDINGS BHD
44.
SIN HENG CHAN (MALAYSIA) BHD
Disclaimer:
The content of the blog posts are for sharing purpose only. Readers are
encouraged to carry out further research and analysis as well as follow up
latest update information before making any investment decisions.
Feel
free to “Like” or “Follow” my Facebook Page (大马股市分析 Malaysia Stock Analysis, https://www.facebook.com/%E5%A4%A7%E9%A9%AC%E8%82%A1%E5%B8%82%E5%88%86%E6%9E%90-Malaysia-Stock-Analysis-100684328044058
) to receive latest updates on new articles.
This comment has been removed by a blog administrator.
ReplyDeletegreat analysis. thank you
ReplyDeleteI find these analysis very well done. Great work.
ReplyDeleteKeep up the excellent FA
ReplyDelete