Wednesday, November 5, 2014

FarEast - cash rich oil palm plantation company

It is a cash rich oil palm plantation company.

It has managed to maintain stable profits margins of about 21% to 23% from 2010 to 2013. Despite a slump in oil palm prices in 2014, the company managed to achieve higher net margins of 19.3% in 1HFY2014 compared to 11.9% in 1HFY2013.

It has a planted land bank of 20768 ha in Pahang of which 16927 are matured. It is majority owned by the Pahang state government, with its biggest shareholder being LKPP with a 25.2% stake.

It is currently trading at 1.05 times book with a trailing 12 month PER of 12 times.

The price to book discount could discount further as the company is expected to undertake an asset revaluation exercise in 2015. The company has a net cash of rm229 million. This is equivalent to tm1.62 per share. As a result, the company pays decent dividends with the latest yield being 3.1%.

Growth drivers for the company include a young tree profile and it had a JV to develop 1416ha of plantation land in Pahang. Only 28% of its trees are old palms, 31% are prime palms, while a significant 41% are young and immature palms.

It remains to be seen if the company may consider boosting liquidity by undertaking corporate exercises.

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Please note that all data given are merely blogger's opinion. It is strongly recommended that you do your own analysis and research before investing.