I see quite a few people saying Roland is the customer B but I'm not sure why they say so. I did guessed Roland has been customer B but recently I think I could be wrong. We all are certain that Wistron is the customer C. The annual report does not tell who is customer A and B. Many think that Sony is one of the top two. I would like to ask could it be Bose and Denon instead?

The Wistron PJ plant, I believe is meant for other production transfer from China yet to be completed in 2022, rather than from FPI, and may spill some benefit to FPI, although in 2021 revenue from Wistron reduced mildly by around 5.3%.

In contrast, accute reduction of work force is worrying because it could be a signal of declining business in near future which the income statement has yet to observe. However, I think that's due to difficulty to get labor replacement rather than loss of business.

@Thirai Thiraviam, thanks for your valuable technical analysis. That's worth to take note.
@JKing, AR page 5 mentioned the labour shortage issue. "The Group anticipates this year to be a very challenging year in view of market volatility, supply chain issue, rising commodity and energy prices and labour shortage issue..." So I think the reduction of work force is not an intended result. Instead, the semi-automation and selective automation could be forced by labor shortage.

I won't give up to learn until I have no question. :)

@Stockraider, when I look up FCPO prices, trade can be done as far as year 2023 from now but you said it could only be contracted 3 months ahead. Please enlighten me. Thanks.

@investor2021trading, does it irritate you? :)
@Stockraider, I've got the answer from AR page 95. For Unitata, 96% of FFB are from own estate. For UniFuji, 59% are from own palm oil mill.

If things could be understood correctly, investors regardless of their capital size and age will be smart enough to make their own independent judgment. So it is more meaningful to discuss the knowledge than buying / selling opinion.

@Abba84, :) Not sure for the rest but I know one thing that is more important than investment profit / loss, i.e., being a more sophisticated investor.

Dear friends, so far I assume that
(i) all the FFB produced by the UP plantation segment are processed by UP owned refineries to become refined palm oil, and <--- I have already verified this is true (for crops in Malaysia)
(ii) Unitata and UniFuji refine almost only CPO from UP owned crops where the external crops only contribute to less than 5% as the feedstock for these two refineries <--- This should be correct according to the AR but just wanna check if I understand correctly
Am I right? Did anyone study this before? Thanks

Dear friends, so far I assume that
(i) all the FFB produced by the UP plantation segment are processed by UP owned refineries to become refined palm oil, and
(ii) Unitata and UniFuji refine almost only CPO from UP owned crops where the external crops only contribute to less than 5% as the feedstock for these two refineries
Am I right? Did anyone study this before? Thanks

So you can see the surge in receivables also.

This 167m adds to the receivable (because it is recoverable). This is the deposit paid when FCPO is sold to ensure customer that you as a producer wont breach the contract and sell the goods to other customer at higher price in future.

The operating expenses is very high (586 m) because of significant increase of production cost per ha (increases from RM 1.2 k+ / MT to RM 1.8 k + / MT, due to fertilizer cost increase, etc. etc.) Where as the balance 70 m I'm not sure (could be replanting etc, no sure). But just under this line in cash flow statement there is 167 m for "(Placement)/recovery of deposits in derivative operations". I think this 167 m is the major part of the cash outflow compare to balance sheet as at 31st Dec.

Sorry... found a mistake just now. Most of the operating payment (656 m) should be operating expenses that appear in the income statement (586 m).

The profit margin for refinery is usually very thin so I can understand why a refinery would very much want to hedge the raw material (CPO bought from plantation) or it may go bankrupt anytime. If I were the refinery plant owner I would like to hedge 100% of the raw material to lock in my thin margin (because refinery business aim should be earning the thin margin of refinery work rather than earning extra by risking its capital). Selling price of the FG (processed CPO) is usually pre-determined and agreed with customer. Then, there are only two possibilities that I would make a temporary loss: (i) unable to receive the cheap CPO from supplier on time and forced to buy the expensive ones at spot price (ii) unable to deliver the FG (processed CPO) to customer on time and therefore have to buy the FG from the market at expensive spot price to meet delivery schedule, or when both scenario (i) and (ii) happen at the same time. I say this is temporary because for scenario (i), I can sell the raw CPO to the market at a time not too long from the time I bought the expensive one, where the price might have gone up or down a little bit, or just refine it and sell at current high price, whereas for scenario (ii), I can sell the FG that produced at later time to open market at a lagged price which could be up or down a little bit from my FG buying cost earlier. I think 2022 Q1 report (note B1 & B2) sounds that it is scenario (i). Probably that explains why there is a huge spike in inventories from a steady level of RM 139 m to RM 254 m as this might be due to the cheap raw CPO that arrive at the gate of refinery mill late. (The external sales of plantation segment might be referring to selling to its joint venture UniFuji whereas internal sales are going to Unitata). @SSLee, I agree the profit of plantation segment is a lot easier to predict and the plantation segment result is very close to my prediction. @Johnzhang, I agree that the forward contract price signed last year was too low but UP had just appointed a new non-executive director who has accounting background which could be a good sign going forward.

Thank you everyone for participating the discussion and help me to check my understanding.

Following is an illustration that I draw based on my best knowledge:
Sell CPO to the big customer at BMD price (RM 3300 / MT) to lock in profit margin 3 months later
-->
Unable to catch up the time to produce the CPO scheduled to be sold at BMD price
-->
Buy CPO from market at current price (RM 6300 / MT) to fulfil the commitment, loss RM 3000 / MT.
-->(after 1.5 months)
Finally produced and delivered the CPO at later time at the cost of RM 1850 / MT.
-->(If at this time the market price remains at RM 6300 / MT)
Sell the CPO at RM 6300 M/T and realise profit of RM 6300 - RM 1850 = RM 4450 M/T
-->
Deducting the loss suffered earlier on, the net and final profit is RM 4450 - RM 3000 = RM 1450 / MT

Conclusion:
The final profit is the same as the planned profit of RM 1450 (RM 3300 - RM 1850)
Above is an ideal case when price remains unchanged at the time interval between the expiry of contract and actual delivery of the the FG.

@JJPTR, I think everybody hope UP is able to improve the elaboration in their report so that things can be understood clearly and easily by everyone. Help the investors to be able to see the intrinsic value of the company is a way they could "reward" the shareholders. I think we all deserve this.

@Pinky, Q1 report explained late FG delivery is the reason that they need to pay the high price to meet the contract (although the late FG could be sold and compensate what had been paid, at later time). But the management did not explain the reason that has caused the late delivery and it looks like the delay was quite significant. I wondering whether or not this is due to long shipping time that has caused the delivery to be late (maybe for 6 weeks long). Or this is a norm since many years back and not just after the Covid years since 2020? This is an open question for all.

This 54 sen has not accounted for the reversion of "losses" in Q1.

@Joerakmo, my guesstimate of Q2 profit is 54 sen based on all info visible to me. Some assumptions applied (e.g. production output is the same as last year, with some price forcast based on recent trend, forward contracts made visible to us, increased CPO & PK production cost, etc.).

Assuming no CPO price change after 31st Mar

@Johnzhang, what's your EPS prediction based on known information acquired from the recent annual report and Q1 report?

Thanks Pinky for your clear and detailed explanation. I've tried to calculate and estimate that 75% of forward sales expiring Jan-Jun contracted before 31st Dec 2021 had been fulfilled in Q1 2022. That imply ASP in Q2 2022 will be significantly higher than Q1. If this is true then I think I'm cautiously optimistic that whole year EPS could achieve somewhere around RM 1.80 if market price of CPO remains above RM 6,000 till year end. Hope that I'm correct.

I found a lot of interesting thing to discuss but let's go one by one that some of us here would not be confused.

But then why a much lower average selling price is disclosed? This puzzled me.

@Pinky, KClow and the rest:
I believe you have been very long with UTDPLT and I hope you're generous to help me understand one thing :-
If all the CPO and PK oil prouced in Jan-Mar 2022 were to be sold to external party at the price disclosed in the 2022 Q1 report, I don't think it could achieve RM 465,538 external sales under Refinery (page 7, note A8). I suspect the actual selling price is very much close to the actual market price. What do you think?

@Thirai Thiraviam, looks like there are motivated sellers. I haven't found any bad news so far and that worries me. Are you in electronic fields or working in purchasing department?

"Nevertheless, due to the large inverse in prices between the spot and future month contracts, contribution has been reduced somewhat." This statement is so bo-cheng-co. "reduced somewhat"? I hope it can be more precise and professional.

Does anyone know the production capacity of Unifuji? Does the production run 7 days a week?

@Stockraider, your CPO selling price is different from the quarterly report.

@Thirai Thiraviam, it has reached your target buying price. :)

Chip drops means the end product can be produced more cheaply. Isn't it a good thing for both the manufacturer and consumer?

That was the first time. 2nd time is this https://www.zigwheels.my/new-motorcycles/yamaha

@zzprozaz https://keyauto.my/2022/01/30/2022-yamaha-motor-malaysia-pricing-update/

Hi JKing, may I know from which source you got to know that Roland is FPI's second largest customer?

Hi Ooihk899 and the rest, did anyone calculated 2021 Q4 UTDPLT actual average CPO selling price?

My estimation is for Jan - Feb 2022 only

Hi Ooihk899, my estimation is around RM 4000. The figure stated in AR is for "less than 6 month" and may not be all accounted for Jan to Mar 2022.

@ooihk899, you predicted 90 to 120 mil for entire Q1 or just for Jan and Feb? My prediction for Jan and Feb in total is 98 mil. Would you be able to estimate the average selling price of CPO for Jan & Feb from all the information you could pull out from the Annual Report?

@somo1, UTDPLT publish early annual report to save the work for Q4 report.

@ooihk899, would you like to predict 2022 Q1 EPS?

I think like many other EMS, FPI too is hiring both local and foreign workers but I do not know the ratio. To achieve a high degree of automation might not be realistic for complicated assembly because the product design is determined by customer and the design always change because of the need to produce new models every year. Also, due to pressure to complete product development in very limited time, a designer might not put as much effort to think of manufacturability of the design but to quickly finish the project. So I believe they still need lots of workers even though they could automate some of the processes. As for the business prospect, I agree with you that it is easy for the OEM to register double digit growth for smart audio and musical instrument section provided the OEM is attached to the right customer. FPI has been allowed to work full swing and achieving higher revenue in Q4 qoq and yet is still facing shortage of labour. If OT is able to solve the labor problem they wouldn't have mentioned this in the report. That means, order in 2022 should be considerably higher than 2021. And I believe Taiwanese's capability to solve problem.

@zzprozaz, raised already, more than enough to cover cost hike and prosperity tax and profit increase if monthly TIV maintain above 40,000.

I'm expecting revenue and profit growth in 2022 to be 10% or more.

@Thirai, I think revenue growth came from Roland, Sony and increasing orders from other customers and maybe a new customer. I believe contribution from Wistron will increase tremendously in 2022.

In the quarter report and annual report, you can see related party transaction with Wistron.

FPI is OEM / ODM for Sony, Bose (not sure about present), Kenwood etc. I'm not sure who are the top 3 customers of FPI but I believe they are Sony, Roland and Sonos (through Wistron). Is that possible for you to get some verification from other sources?

@Thirai Thiraviam, I think resent sell down of FPI is due to market's over worry about the spilt effect of this news: https://focusmalaysia.my/andy-hall-severing-ties-with-vs-industry-for-backtracking-on-its-promises/