MARKET DEVELOPMENT
Price Recovery of Crude Palm Oil to Boost Sarawak Plantation Earnings
Price Recovery of Crude Palm Oil to Boost Sarawak Plantation Earnings
19/04/2016 (Borneo Post) - The upward movement of crude palm oil (CPO) prices over the past few months will benefit plantation players such as Sarawak Plantation Bhd (Sarawak Plantation).
The research arm of MIDF Amanah Investment Bank Bhd (MIDF Research) yesterday outlined the recovery in CPO prices and the positive growth for the firm’s fresh fruit bunches (FFB) production would serve as ‘double blessings’ and boost its earnings in 2016.
Being a pure upstream planter, MIDF Research noted Sarawak Plantation’s earnings are sensitive to the changes in CPO prices.
The average CPO price of RM2,411 per metric tonne (MT) in the first quarter of 2016 (1Q16) was higher than the company’s average CPO selling prices of RM2,100 per MT in 2015.
Thus, MIDF Research estimated that the core net profit of the company would more than double to RM38.6 million in 2016 based on its average CPO price assumption of RM2,450 per MT.
While the impact of El Nino had generally hitting FFB production of Malaysia planters, it pointed out that Sarawak planters were faring better in terms of FFB production due to the less severe El Nino impact in East Malaysia.
MIDF Research noted that the group’s 1Q16’s FFB production fell by six per cent year-on-year, lower than the average 10 per cent drop in Malaysia.
Despite the decline in output in 1Q16, the research firm estimated Sarawak Plantation’s FFB production growth will be six per cent in financial year 2016 (FY16) ending Dec 2016 supported by 2,600 ha of new palm oil planted area coming to maturity.
The company’s average oil palm tree age profile is 11 years old where 52 per cent of palm trees were in prime mature stage (11-20 years) while 10 per cent of palm trees were in old mature stage ( more than 20 years).
Meanwhile, 38 per cent of the company’s palm trees are not matured or young mature, suggesting FFB production going forward will be supported when immature palm trees come into maturity, coupled with the ongoing progress of existing mature areas into higher yielding brackets.
To note, Sarawak Plantation’s FFB production amounted to 280,000MT in 2015.
Meanwhile, the research firm also derived a fair value of RM2.28 per share for Sarawak Plantation’s share price, pegging it to an estimate price-earnings ratio (PER) of 16.5 times based on FY16 estimate earnings per share of 13.82 sen which was close to the company’s five-year mean historical
The research arm of MIDF Amanah Investment Bank Bhd (MIDF Research) yesterday outlined the recovery in CPO prices and the positive growth for the firm’s fresh fruit bunches (FFB) production would serve as ‘double blessings’ and boost its earnings in 2016.
Being a pure upstream planter, MIDF Research noted Sarawak Plantation’s earnings are sensitive to the changes in CPO prices.
The average CPO price of RM2,411 per metric tonne (MT) in the first quarter of 2016 (1Q16) was higher than the company’s average CPO selling prices of RM2,100 per MT in 2015.
Thus, MIDF Research estimated that the core net profit of the company would more than double to RM38.6 million in 2016 based on its average CPO price assumption of RM2,450 per MT.
While the impact of El Nino had generally hitting FFB production of Malaysia planters, it pointed out that Sarawak planters were faring better in terms of FFB production due to the less severe El Nino impact in East Malaysia.
MIDF Research noted that the group’s 1Q16’s FFB production fell by six per cent year-on-year, lower than the average 10 per cent drop in Malaysia.
Despite the decline in output in 1Q16, the research firm estimated Sarawak Plantation’s FFB production growth will be six per cent in financial year 2016 (FY16) ending Dec 2016 supported by 2,600 ha of new palm oil planted area coming to maturity.
The company’s average oil palm tree age profile is 11 years old where 52 per cent of palm trees were in prime mature stage (11-20 years) while 10 per cent of palm trees were in old mature stage ( more than 20 years).
Meanwhile, 38 per cent of the company’s palm trees are not matured or young mature, suggesting FFB production going forward will be supported when immature palm trees come into maturity, coupled with the ongoing progress of existing mature areas into higher yielding brackets.
To note, Sarawak Plantation’s FFB production amounted to 280,000MT in 2015.
Meanwhile, the research firm also derived a fair value of RM2.28 per share for Sarawak Plantation’s share price, pegging it to an estimate price-earnings ratio (PER) of 16.5 times based on FY16 estimate earnings per share of 13.82 sen which was close to the company’s five-year mean historical