On a steady, winning track
05/08/2024 (The Edge Malaysia) - Established in 1993, Sabah-based Innoprise Plantations Bhd (KL:INNO) is primarily involved in the cultivation of oil palms and processing of fresh fruit bunches (FFB) to produce crude palm oil (CPO) and palm kernel (PK). Its operations span 22,763ha in the Gunung Rara or Kalabakan area, with 54% currently being used for oil palm cultivation and 12% for industrial tree plantations.
The group, which is 50.22% owned by Yayasan Sabah Group, also operates a palm oil mill capable of processing 60–90 metric tonnes of FFB per hour. Another major shareholder is TSH Resources Bhd (KL:TSH) with 21.94%. Its group executive director Tan Aik Kiong is also Innoprise’s managing director.
Innoprise achieved a return on equity (ROE) of 26.24% in FY2021 and 26.45% in FY2022. This measurement of how efficiently it is using investors’ money to generate profits dipped to 17.2% in FY2023 as CPO prices trended lower after surging to record highs past RM7,000 per tonne in mid-2022 while operational costs rose. The group recorded its highest net profit of RM86.2 million in FY2021, which slipped 4.2% to RM82.6 million in FY2022, then dropped 36.6% to RM52.4 million in FY2023.
Still, its weighted ROE over those three years came to 21.8%, leading its plantation peers with a market capitalisation of under RM1 billion. This bagged the group its fourth consecutive award for the highest return on equity over three years at The Edge Malaysia Centurion Club Corporate Awards 2024.
The group also took home the award for the highest returns to shareholders over three years under the plantation sector after its return to shareholders recorded a compound annual growth rate of 15.42%, based on Centurion Club awards methodology, as its share price (adjusted) rallied from 73 sen on March 31, 2021, to RM1.45 by end-March this year — the review period for the latest Centurion Club awards.
The group has a dividend policy of paying out at least 80% of its profit after tax. For FY2023, the group paid 9.5 sen dividends amounting to RM45.49 million or 86.83% of its PAT.
In terms of FFB production, Innoprise achieved an 11% increase in FY2023 to 271,493 tonnes from 245,189 tonnes in FY2022, after FFB production rose 3.3% in FY2022 from FY2021. CPO production grew to 54,467 tonnes in FY2023 from 48,196 tonnes in FY2022, while PK production rose to 9,430 tonnes from 8,126 tonnes.
Its FY2023 yield per mature hectare was 22.27 tonne/ha, up 8.8% from 20.46 tonne/ha in FY2022, due to higher hectarage being harvested and its oil palms’ improving maturity, Innoprise says in its 2023 annual report. And given that 92.5% of its palms are in prime maturity stage of eight years and more, Innoprise says it won’t need to replant over the next seven to eight years.
While European demand appears to be declining as the new European Union Deforestation-Free Regulation kicks in later this year, global demand for palm oil remains resilient, particularly in key markets such as India, China and Pakistan, it notes. In addition, palm oil prices are projected to rise, driven by forecasts indicating that global palm oil production growth in 2024 will be the slowest in four years, says Innoprise.
With demand for palm oil products remaining strong and the current level of CPO and PK prices, Innoprise says it is confident of achieving a reasonable profit in the year ahead.