Summary

Bplant is a niche plantation player with huge strategic landbank near township and sizable plantation estates that can produce 1 million MT of FFB and RM500 million profits a year at current CPO prices. At current share price of RM1.01, Bplant has limited downside but huge upside potentials.

I believe Bplant should be worth RM2.66 to RM3.36 per share based on 15x PER. Sum-of-parts valuation will give higher valuation of RM3.92 to RM6.61 per share, offering upside potentials of +288% to +555%.

Furthermore, Bplant offers the highest dividend yields of 17.1% to 20.6% for FY2022 if CPO prices remain at RM5,000-6,000/MT throughout the year.

For more details on Bplant landbank and valuation, please refer to my earlier article:

https://klse.i3investor.com/web/blog/detail/dragon328/2022-04-26-story-h1622262012-BPlant_has_Tremendous_Upsides_as_a_Prime_Take_over_Target

Q1FY2022 Results Review

On 23 May 2022, Bplant announced the financial results for its Q1 FY2022 (Jan-Mar 2022).

Operating profit for Q1FY2022 increased by 353% over last year due to higher average CPO price realized and higher FFB production. Profit before tax for Q1FY2022 was only 6% higher than that of Q4FY2021 despite 19.5% higher average CPO price realized because FFB production was 21.1% lower.

The profit before tax of RM145.4 million in Q1FY2022 was lower than my earlier projection of RM187 million mainly due to the lower FFB production of 195,882 MT compared to my assumption of 250,000MT.

Bplant FFB production should increase in subsequent 3 quarters as seen in FY2021 (Q1 – 180,165MT, Q2 – 231,702 MT, Q3 – 263,276 MT, Q4 – 248,328 MT). So I will assume an average of 250,000 MT of FFB production for the remaining 3 quarters of FY2022 and project profits before tax as follow:

Bigger plantation stocks like KLK and Sime Plantation are trading at PER of 15x to 20x. I will take the lower end of the PER range of 15x to value BPlant to get a fair value of RM2.66 to RM3.36 for average CPO prices of RM5,000/MT to RM6,000/MT.

Unique angle in Strategic Landbank

One unique feature that differentiate Bplant from other plantation companies is that Bplant owns large tracts of landbank (total 9,741 ha) near townships that have development potential for industrial or residential use.

BPlant just disposed off a piece of land of 671 ha at Kulai for a selling price of RM640,000 per ha or RM6.00 psf. If I were to value this 9,741 ha of Bplant land at RM6.00 psf, it would be worth RM6.290 billion or RM2.81 per share.

For a more conservative assumption of RM4.00 psf, these land parcels would be worth RM4.194 billion or RM1.87 per share.

Huge Upside in Plantation Landbank

Bplant has another 65,520 ha of plantation land planted with palm oil trees besides the 9,741 ha of strategic landbank above. This 65,520 ha of plantation land is yielding almost 1 million of FFB a year and generating profits of around RM500 million a year.

If I value it at RM70,000/ha (which is the average current valuation of Sime Plantation and IOI Corp), it will be worth RM4.586 billion which is cheap at asset yield of RM500/4586 = 10.9%.

If I value it at RM130,000/ha (which is 30% above the current valuation of KLK), it will be worth RM8.518 billion at an asset yield of 500/8518 = 5.9% which is more reasonable.

Sum-of-Parts Valuation

I sum up the valuation of the two pots of landbank above as follow:

Record High Dividend Yields

Bplant declared a 1^st interim dividend of 7.3 sen for Q1 FY2022. This is specially high as Bplant distributes part of the land disposal gain to shareholders as dividend. For the remaining 3 quarters, EPS may total 12.9 sen for average CPO price of RM5,000/MT and 17.4 sen for average CPO price of RM6,000/MT.

Bplant paid out 77.8% of net profit as dividends in FY2021. If I assume same payout ratio, Bplant may distribute dividends of 10.0 sen to 13.5 sen for the remaining 3 quarters of FY2022. Hence, total dividends for FY2022 may top 17.3 sen to 20.8 sen yielding 17.1% to 20.6%.