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(Icon) Innoprise Plantations Bhd (1) - The Cheapest Plantation Stock in Bursa Malaysia
Many people has never heard of this plantation company. This is because it is listed under Industrial Products, instead of Plantation sector.
This company was previously known as Sinora Berhad. In 2006, Sinora got rid of its old business, clean up its balance sheet by way of a rights issue and decisively ventured into oil palm plantation. Despite being a pure plantation company, all these years they never bother to change their sectorial classification.
Innoprise is 51% owned by Sabah State Agency, 22% owned by TSH Resources Berhad. When Sinora (renamed Innoprise Plantations Bhd) was transformed into a plantation company, they invited TSH to come on Board by way of restricted issue and renunciation of rights shares in 2007. They knew they have no experience, so they tapped TSH's expertise.
Of course, we all know that TSH has superb management skills, they are very efficient planter. The current Managing Director of Innoprise is Datuk Kelvin Tan, the onwer of TSH. He has been there since 2007.
(1) planting schedule
Innoprise has more than 20,000 Ha land in Sabah. But they decided to plant only 13,000 Ha as the other land are too steep and hence not suitable. They planted in 2007 (3,872 ha), 2008 (1,173 ha), 2009 (3,967 ha), 2010 (1,815 ha) and 2011 (2,173 ha) respectively. The entire 13,000 has been planted. No more planting going forward. They are building a mill now, should be ready by mid 2014.
Based on back of envelope calculation, about 50% of the trees will turn prime in next one to two yeras, while the remaining 50% will mature. FFB production will spike over the immediate future. Just nice for a CPO bull run.
(2) FFB production
FFB production will be all the way up, up and up until 2021 (based on conservative assumptions that peak yield is 25 MT per ha)
| year | 2014 | 2015 | 2016 | 2017 | 2018 | 2019 | 2020 | 2021 | 2022 |
| FFB(MT) | 125,851 | 180,024 | 224,280 | 266,190 | 292,422 | 312,678 | 320,654 | 325,000 | 323,000 |
| y-o-y growth (%) | 56% | 43% | 25% | 19% | 10% | 7% | 3% | 1% | -1% |
| CPO (MT) | 26,429 | 37,805 | 47,099 | 55,900 | 61,409 | 65,662 | 67,337 | 68,250 | 67,500 |
(3) net profit if average CPO price is RM2,600
based on folloing assumptions : cost of RM1,300 per MT CPO, 25% tax rate, negligible financing cost as low gearing
| year | 2014 | 2015 | 2016 | 2017 | 2018 |
| revenue (RMm) | 69 | 98 | 123 | 145 | 160 |
| Cost (RMm) | (34) | (49) | (61) | (73) | (80) |
| Net profit (RMm) | 26 | 37 | 46 | 55 | 60 |
| EPS (sen) (190m shares) | 14 | 20 | 24 | 29 | 32 |
| implied PER at RM1.76 (times) | 13 | 9 | 7 | 6 | 5.6 |
(4) enterprise value per ha lowest in Bursa Malaysia
Market cap = RM190m x 1.76 = RM334m, loan = RM36m, cash = RM2m (note : almost zero gearing, meaning strong dividend payment capacity going forward)
hence Enterprise Value = RM368m
EV per hectare = RM368m / 13,000 = RM28,000 per hectare
(5) target price
due to its small market cap, we should ascribe a relatively low EV per ha of RM40,000 (big cap trades at EV per ha ranging from RM60,000 to RM100,000+).
Based on RM40,000 per ha, Innoprise's sustainable market cap works out to be RM40,000 x 13,000 ha = RM520m, or RM2.75 per share
This represents 55% upside from current price of RM1.76
(6) implied PER
based on target price of RM2.75 and FY2015 EPS of 20 sen, PER works out to be approximately 13 times. Which is not unreaosnable for a company with strong dividend payment capacity
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Discussions
5 people like this. Showing 38 of 38 comments
Great write up. Hefty FFB production growth is started from this year onward to achieve at least 20% CAGR for the next 4 years.
2014-03-07 15:56
Recent performance of its plantation division:
Turnover:
31 Dec 13 - 10,322,000
30 Sep 13 - 8,465,000
30 Jun 13 - 6,290,000
31 Mar 13 - 4,441,000
Profit / (Loss) before tax:
31 Dec 13 - 3,085,000
30 Sep 13 - 3,038,000
30 Jun 13 - ( 132,000 )
31 Mar 13 - ( 1,562,000 )
EPS:
31 Dec 13 - 1.25 cents
31 Sep 13 - 1.41 cents
30 Jun 13 - ( 0.13 cents )
30 Mar 13 - ( 0.89 cents )
2014-03-07 16:14
INNO's management team are more competent than Pinepac. Pinepac does not whole own the plantation business in Indonesia. Its operation keep making loss. Some more, I can't see their FFB growth for the past 2 years even though their young tree entering maturity stage. Don't really know how they take care the palm oil tree.
2014-03-07 16:53
I consider myself to be an objective person. I seldom jump into conclusion unless there is sufficient evidence. For example, in the case of ivory and London Biscuits, I argued that there is not sufficient evidence to prove bad corporate governance. The two companies might have made some mistakes in the past two years, and they might turn around once they ironed out the kinks. (I don't know whether I am right or wrong, but at least that is how I sort out my thought process)
But in the case of H, there is simply no reason to explain that kind of year after year, consistently subpar FFB yield with that kind of age profile, some more in Sabah. I strongly suspect bad corporate governance as the direct contributing factor (you know what I mean)
I won't touch this company with a ten foot pole
Same for D Land
2014-03-07 17:01
Company P ?
Sigh, poor execution, less than satisfactory corporate governance
Not for me ....
2014-03-07 17:04
Harlen's executive chairman is an 88 year old man. At such age, how he got ability to manage the business operation of the company. Operation has not returned to black even though the FFB production in final quarter was 34% higher than 3rd quarter 2013. It is better for him to step down. If I am not mistaken, he is still drawing 1.45 million salary and the total Directors remuneration about 4 million each year.
Harlen disposed its 2,410 hectares of plantation land in Sabah in year 2013. Their FFB production would be lower this year.
2014-03-07 18:10
Please take a look at Golden Land(plantation stock) which is cheaper, NTA RM2 and have dividend paying record in the past.
2014-03-08 11:37
I did a quick check. Golden land has 9359 ha plantation land in Sabah, out of which 8613 ha planted, 6917 ha matured. They also have 8157 ha unplanted land in Kalimantan.
Enterprise value = RM223m equity + loan of RM142m - RM19m cash = RM347m
Value of empty land per ha in Kalimantan let's say RM3000 per ha. Value = RM25m
EV for Malaysian plantation is hence RM347m less RM25m = RM322m
RM322m / 8613 ha = RM38,546 per ha
Of course they have some smallish property projects.
2014-03-08 13:34
Alex EPS for GL Bhd is higher ie 1.95sen vs Innoprise 1.25sen in latest quarterly report. NTA for GL Bhd also way higher despite share price cheaper. GL Bhd will benefit from current surge in CPO price not Innoprise as most of Innoprise trees are still immature.
2014-03-08 15:34
My friend told me yesterday's Focus Malaysia magazine recommended buy Hap Seng Plantations. Said TP rm2.90.
2014-03-08 15:38
Cepat's mature plantation area is about 7,696 hectare only & NIL immature area.
2014-03-08 17:33
your cost of production estimate at RM1300 is too low... i think they easily hit RM1700 bcos their trees are still almost all immature.
Also, remember that this stock is SUPER ILLIQUID.. let say u buy 10,000 shares... maybe u already > 50% volume of the day... so be careful
2014-03-09 12:59
Japan sees higher chance of El Nino this summer
http://www.reuters.com/article/2014/03/10/us-weather-elnino-japan-idUSBREA2908B20140310
2014-03-10 15:09
Icon bro, ur planting schedule is not accurate
"The company plans to plant up the balance of 2,135 hectares of plantable land in 2013." (taken from Innoprise AR 2013 chairman statement)
I dunno where u get the planted year, coz it is not stated in any statement of Inno
Inno only shows matured, immatured and newly planted hectare area.
2014-05-09 13:23
Innoprise oilpalm age profile as at 31 Dec 2013
year planted size (hec) percentage
matured 5896 43.7
matured in 2014 5209 38.6
immatured 262 1.9
newly planted 2135 15.8
total 13502 100
this is my own spreadsheet
2014-05-09 13:25
They leased the land from state government. As the land doesn't belong to them, it doesn't show up in their book
The lease was for 30 years only
However, in latest annual report, the company said the state government has extended the lease to 60 years
So now they can plant two cycles, just like many sarawak plantation companies
2014-05-09 20:47
Today Innoprise announced April FFB production of 9111 MT
If annualized, equals 110,000 MT FFB
Based on 21% OER, CPO production is 23,000 MT
Based on CPO price of RM2600 and cost per MT of RM1300, profit per MT would be RM1300
PBT will be RM1300 x 23,000 = RM30 mil
Net profit = RM22.4 mil
Market cap now RM361 mil
PER 16 times
Of course this is just a rough calculation based on various assumptions, might be different from actual figures
For discussion only, please don't blame me when results differs
2014-05-09 21:08
tq bro, I always keep track of ur posting, ur hv been feeding me lots of precious info.
2014-05-12 10:14
Integrity. Intelligent. Industrious. 3iii (iiinvestsmart)
>>>>>
5) target price
due to its small market cap, we should ascribe a relatively low EV per ha of RM40,000 (big cap trades at EV per ha ranging from RM60,000 to RM100,000+).
Based on RM40,000 per ha, Innoprise's sustainable market cap works out to be RM40,000 x 13,000 ha = RM520m, or RM2.75 per share
This represents 55% upside from current price of RM1.76
(6) implied PER
based on target price of RM2.75 and FY2015 EPS of 20 sen, PER works out to be approximately 13 times. Which is not unreaosnable for a company with strong dividend payment capacity
>>>>>>
27.12.2019
Price 94.5 sen
2019-12-28 14:07
Base on the conditions at the time of writing, INNO was seen worth at that TP but valuation change as time goes on. Be liquid and recognize the impermanent nature.
2019-12-28 14:25
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Is innoprise sinora or sindora which was taken private two years back........sindora pays very good dividen when it was listed......too sad
2014-03-07 15:37