MARKET DEVELOPMENT
AffinHwang Research Ceases Coverage on Sarawak Plantations on Poor Liquidity
AffinHwang Research Ceases Coverage on Sarawak Plantations on Poor Liquidity
25/08/2015 (Borneo Post) - Research firm Affin Hwang Capital Sdn Bhd (AffinHwang Research) is ceasing coverage on Sarawak Plantations Bhs (Sarawak Plantations) on poor stock liquidity With core net profit for the first half of 2015 at RM6.2 million and crude palm oil’s (CPO) average selling prices (ASP) trading lower.
“Sarawak Plantations’ full year 2015E performance is unlikely to match our expectation. There are avenues for growth, including raising its comparatively low fresh fruit bunch (FFB) yield,” it said in a note yesterday.
“We are however ceasing coverage as stock liquidity continues to be disappointly low. Unless there are transactions which will highlight the low implied valuation for its land bank and planted area, we do not see investor interest improving anytime
soon.”
This comes after Sarawak Plantation announced its first half of 2015 core net profit declining 80 per cent year on year to RM6.2 million, below expectations of 6M15 core net profit – excluding a RM5.8 million gain on disposal of land and one-off items – declined by 79.9 per cent y-o-y to RM6.2 million, mainly due to lower selling prices and sales volumes of CPO and palm kernel.
“With CPO prices now lower than the 6M15 average of RM2,183 per metric tonne, it is unlikely for its 2015E core net profit to match our forecast of RM40.3m.
Based on a revised CPO ASP forecast of RM2,150 per metric tonne for 2015E and RM2,400 per metric tonne for 2016E-17E, AffinHwang Research said the implied 2015E-17E core net profit forecasts would be cut by 63.1, 5.9 and 5.3 per cent respectively.
“New areas are being planted and replanting has intensified,” it added. “We are raising its low FFB yield will further enhance FFB production growth, even though progress in the past have been slow, at times stymied by weather conditions and management changes.
“We are however ceasing coverage on Sarawak Plantations as stock liquidity continues to be disappointingly low.
“Unless there are transactions which will highlight the low implied valuation for its land bank 41,403 ha and panted area of 33,306 ha, we do not see investor interest improving anytime soon.”
“Sarawak Plantations’ full year 2015E performance is unlikely to match our expectation. There are avenues for growth, including raising its comparatively low fresh fruit bunch (FFB) yield,” it said in a note yesterday.
“We are however ceasing coverage as stock liquidity continues to be disappointly low. Unless there are transactions which will highlight the low implied valuation for its land bank and planted area, we do not see investor interest improving anytime
soon.”
This comes after Sarawak Plantation announced its first half of 2015 core net profit declining 80 per cent year on year to RM6.2 million, below expectations of 6M15 core net profit – excluding a RM5.8 million gain on disposal of land and one-off items – declined by 79.9 per cent y-o-y to RM6.2 million, mainly due to lower selling prices and sales volumes of CPO and palm kernel.
“With CPO prices now lower than the 6M15 average of RM2,183 per metric tonne, it is unlikely for its 2015E core net profit to match our forecast of RM40.3m.
Based on a revised CPO ASP forecast of RM2,150 per metric tonne for 2015E and RM2,400 per metric tonne for 2016E-17E, AffinHwang Research said the implied 2015E-17E core net profit forecasts would be cut by 63.1, 5.9 and 5.3 per cent respectively.
“New areas are being planted and replanting has intensified,” it added. “We are raising its low FFB yield will further enhance FFB production growth, even though progress in the past have been slow, at times stymied by weather conditions and management changes.
“We are however ceasing coverage on Sarawak Plantations as stock liquidity continues to be disappointingly low.
“Unless there are transactions which will highlight the low implied valuation for its land bank 41,403 ha and panted area of 33,306 ha, we do not see investor interest improving anytime soon.”