MARKET DEVELOPMENT
Promising Production Outlook for Sarawak Oil Palms in FY2014
Promising Production Outlook for Sarawak Oil Palms in FY2014
04/06/2014 (Borneo Post) - A promising production outlook is pegged for Sarawak Oil Palms Bhd (Sarawak Oil Palms) for financial year 2014 (FY14) despite registering unexciting first quarter (1Q) earnings.
According to analyst Alvin Tai of RHB Research Institute Sdn Bhd (RHB Research), Sarawak Oil Palms’ 1Q earnings were unexciting, making up only 16.9 per cent of its full-year forecast.
“However, we believe subsequent quarters will make up for the weak 1Q. Sarawak Oil Palms’s production has a tendency to skew heavily into the second half (2H), which made up 69 per cent of full-year production in the past two years,” Tai projected.
RHB Research finetuned its forecast to RM198 million from RM199 million previously, toning down its fresh fruit bunches (FFB) production forecast for FY14 to 1.159 million tonnes from 1.167 million tonnes.
In terms of Sarawak Oil Palms’ promising production outlook, the analyst highlighted that the group’s FY14 production expectation represents a strong growth of 20.9 per cent.
“Sarawak Oil Palms’s production grew by an impressive 21 per cent in the first four months of the year. We expect the company to sustain this production growth for the rest of the year,” he pointed out.
That said, RHB Research expects FY15 production growth to be slower at 7.4 per cent, bringing Sarawak Oil Palms’ tonnage to 1.241 million tonnes.
Despite the slower growth rate, the analyst pointed out that profitability will get stronger on higher palm oil price and stronger yield.
“Management expects its yield to start climbing as early as 2015 after sliding in the past five years due to new mature areas,” Tai noted.
Overall, at 15.8-fold price-earnings (P/E), the analyst pointed out that its Sarawak Oil Palms is fairly valued based on FY14 earnings.
“However, we expect the market to start looking at FY15 earnings soon, being at the halfway point of FY14 now,” he said.
Based on FY15 numbers, Tai noted that Sarawak Oil Palms trades at a still-inexpensive valuation of 12.2-fold and remains as one of the cheapest plantation exposures in Malaysia.
All in, RHB Research maintained ‘buy’ on the stock while raising its fair value to RM9.08 per share, rolling over the valuation horizon to current year 2015 (CY15) from CY14 before.
According to analyst Alvin Tai of RHB Research Institute Sdn Bhd (RHB Research), Sarawak Oil Palms’ 1Q earnings were unexciting, making up only 16.9 per cent of its full-year forecast.
“However, we believe subsequent quarters will make up for the weak 1Q. Sarawak Oil Palms’s production has a tendency to skew heavily into the second half (2H), which made up 69 per cent of full-year production in the past two years,” Tai projected.
RHB Research finetuned its forecast to RM198 million from RM199 million previously, toning down its fresh fruit bunches (FFB) production forecast for FY14 to 1.159 million tonnes from 1.167 million tonnes.
In terms of Sarawak Oil Palms’ promising production outlook, the analyst highlighted that the group’s FY14 production expectation represents a strong growth of 20.9 per cent.
“Sarawak Oil Palms’s production grew by an impressive 21 per cent in the first four months of the year. We expect the company to sustain this production growth for the rest of the year,” he pointed out.
That said, RHB Research expects FY15 production growth to be slower at 7.4 per cent, bringing Sarawak Oil Palms’ tonnage to 1.241 million tonnes.
Despite the slower growth rate, the analyst pointed out that profitability will get stronger on higher palm oil price and stronger yield.
“Management expects its yield to start climbing as early as 2015 after sliding in the past five years due to new mature areas,” Tai noted.
Overall, at 15.8-fold price-earnings (P/E), the analyst pointed out that its Sarawak Oil Palms is fairly valued based on FY14 earnings.
“However, we expect the market to start looking at FY15 earnings soon, being at the halfway point of FY14 now,” he said.
Based on FY15 numbers, Tai noted that Sarawak Oil Palms trades at a still-inexpensive valuation of 12.2-fold and remains as one of the cheapest plantation exposures in Malaysia.
All in, RHB Research maintained ‘buy’ on the stock while raising its fair value to RM9.08 per share, rolling over the valuation horizon to current year 2015 (CY15) from CY14 before.