Investment Highlights

• We maintain HOLD on Chin Teck Plantations (CTP) with an unchanged fair value of RM7.55/share, based on a FY24F PE of 10x- in line with its 2-year average. We ascribe a neutral 3-star ESG rating to CTP.

• We reviewed CTP’s investment securities in this report. We think that it is interesting that CTP holds a significant amount of investment securities in its balance sheet. Investment securities are liquid and including these, CTP’s cash equivalents amount to RM520.5mil. This is 57.1% of the group’s total assets of RM911.3mil as at end-August 2023.

• CTP’s investment securities consist mainly of quoted shares outside Malaysia. In FY22, shares outside Malaysia comprised 62.7% of investment securities while shares in Malaysia made up another 16.4%.

• CTP’s investment securities climbed by 96.3% to RM138mil in FY23 from RM70.3mil in FY18. Investment securities comprised 15.1% of CTP’s total assets of RM911.3mil in FY23.

• We attribute the increase in investment securities to CTP’s purchases in the open market. CTP’s purchases of investment securities ranged from a low of RM9.6mil in FY18 to a high of RM27.5mil in FY21. At the same time, CTP also sold its investment securities. CTP’s proceeds from the disposal of investment securities ranged from a high of RM59mil in FY18 to a low of RM5.7mil in FY19. With the exceptions of FY18 and FY20, CTP’s purchases were larger than its disposals.

• One of CTP’s investment securities is Boustead Plantations (BPlant). According to BPlant’s Annual Report, CTP holds 5.6mil shares or 0.3% of BPlant. According to Bloomberg, CTP has been holding BPlant shares for 2.5 years. This implies that CTP bought BPlant in FY21.

• Based on this, we estimate CTP’s cost of purchase in BPlant at RM0.47/share compared to the current share price of RM1.47. Hence, CTP is enjoying unrealised gains of RM5.6mil or a return of more than 200% from its investment in BPlant.

• We believe that CTP has not sold its shares in BPlant yet. In CTP’s case, gains or losses on the disposal of investment securities are recognised in the Statement of Comprehensive Income instead of P&L.

• CTP is currently trading at a FY24F PE of 10.1x, which is in line with its 2-year average.

Source: AmInvest Research - 6 Nov 2023