FIGURE 1: UNITED PLANTATIONS BERHAD LAST 2 YEARS SHARE PRICE TREND

 

**analysis based on 2018 annual report.

1.       GENERAL INTRO: United Plantations is one of the main oil palm plantations in Malaysia.

 

2.       NOTABLE POINTS:

a.       from 2018 report, stated that its total cultivated land banks covers approximately 50,000ha spread over Malaysia (80%) and Indonesia (20%) and is supported by 6,508 employees across the Group.

b.      announce that having acquired Pinehill Plantations Estates (3,642 Ha) for RM414 million

c.       overall United Plantations achieve a good production efficiency whereby its Crude Palm Oil (CPO) average yield per hectare is 5.71 MT, which is much higher the Malaysian National CPO yield (3.42 MT/Hectare)

d.      United Plantations also involves in coconut trees cultivation, in the present year produced ~RM71 million nuts

e.      main conditions that affect the oil palm industry is on the crude palm oil (CPO) prices, which in turn is affected by whether there is an oversupply of CPO stocks itself, as well as prices/supply of competitive products such as soya bean oil, also, decline of mineral oil prices also adversely affect the financial feasibility of using palm oil products in the biodiesel industry. Furthermore, higher import duties imposed by countries such as India are also crucial factors

f.        other risk factors include rising labour cost and other input costs as well as weather conditions. Occurrence of drought causes shortage of water that is needed for the cultivation of oil palm. On the other hand, heavy raining and flooding are also harmful to oil palm trees.

g.       government supports by removing export duty at times to stabilize the prices

h.      in terms of coconuts cultivations, the industry faces competition from cheaper coconuts imported from Indonesia, which seriously affected UP's profitability

 

3.       IS THIS COUNTER A STRONG GROWTH STOCK? 

a.       REVENUE RANGE (million): ~1305.5 million in 2018 annual report, this is a high revenue company.

b.      SHARE PRICE: from 2018-2019, share price share price decreasing from around RM28.00 to around RM26.00

c.       EARNING PER SHARE (EPS): earning per share in last 5 years increased from 134 to 179sen

d.      FUTURE POTENTIAL/PROSPECTS: quite dependable and reliable counter, share price expected to be stable.

e.      CAPITAL EXPENDITURE (CAPEX): spending on purchase of new fixed assets is RM 120.7 million, around 4% of total assets.

 

4.       IS THIS A STRONG DIVIDEND STOCK?     

a.       DIVIDEND YIELD: in 2018 report, UNITED PLANTATIONS declared a total dividend payout of 140 sen per share, amounts to dividend yield of 5.32 % based on current share price.

b.      CONSISTENCY: consistent dividend payout, last five years (2015-2019) dividends declared range between 100 to 165 sen per share.

c.       DIVIDEND PAYOUT RATIO: in 2018 financial year, UNITED PLANTATIONS paid out about 79% of its earnings to investors in the form of dividend. The dividend payout ratio is constant at around 70-80% of earnings in last five years.

 

5.       IS THE MANAGEMENT PERFORMANCE GOOD?

a.       RETURN ON EQUITY (ROE): in 2018 financial year, UNITED PLANTATIONS achieved a reasonable return of shareholders’ equity, at 14.45%. Last five years ROE range from 13 to 15%.

b.      COST-TO-INCOME RATIO: cost-to-income ratio is high at about 165%.

 

6.       OTHER INDICATORS:

a.       CASH FLOW: cash flow is positive, around RM 151.1 million, equivalent to RM 0.73 per share

b.      SUPPORT BY INSTITUTIONAL INVESTORS: this counter is very well supported by institutional investors, there are 27 institutional investors at top 30 major shareholders list, including EPF (13.48%), SKIM AMANAH SAHAM MALAYSIA (5.17%), PERBADANAN PEMBANGUNAN PERTANIAN NEGERI PERAK (6.29%), MAXIMUM VISTA SDN BHD (43.12%), UNITED INTERNATIONAL ENTERPRISES LIMITED (4.18%), insurance companies and investment funds.

 

Disclaimer: The content of the blog posts are for sharing purpose only. Readers are encouraged to carry out further research and analysis as well as follow up latest update information before making any investment decisions.

 

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