Posted by necro > 2013-01-19 22:59 | Report Abuse

Hmmmm

Posted by Gabriel Khoo > 2013-02-28 00:10 | Report Abuse

A good buy for long term below rm5

Posted by kcchongnz > 2013-02-28 05:21 | Report Abuse

Date Open Price Target Price Upside/Downside Price Call
22/01/2013 5.72 6.77 +1.05 (18.36%) BUY
28/12/2012 5.74 6.77 +1.03 (17.94%) BUY
28/11/2012 6.00 7.95 +1.95 (32.50%) BUY



13/09/2012 6.32 9.27 +2.95 (46.68%) BUY


12/09/2012 6.41 9.37 +2.96 (46.18%) BUY

Just stumbled to this target prices (TP) for SOP in i3investor. Very interesting.
OSK on 12 September provided a TP for SOP at 9.37. Wow, very precise to two decimal places, or 0.1%, an accuracy required for rocket science! More interestingly, one day later, the TP was revised to 9.27, for a 1% difference, another rocket science, incredible. I guess palm oil future must have dropped by 1.0672% on that day. Then 2 months and 15 days later on 28 November, 2012, OSK revised its TP to 7.95again, for a downward revision of 14%. And exactly one month later on 28 December, OSK again revised its TP downward by another hefty 15%, in less than 1 month, OMG! I thought some palm oil estate of SOP got burnt or palm oil prices could have plunged to close to its production cost or what . But when I read its latest analysis, which is full of past information and future projections and very detail, I found that is not the case. And this is what they wrote:
[One of our best sector buy ideas. We value SOP at a FV of RM6.77, based on 13.0x FY13 PE. The company continues to be one of our top plantation sector buy ideas for its strong growth prospects, solid management and attractive valuations……. It also possesses one of the best tree age profiles in terms of near- and medium-term production growth while trading at valuations below the industry benchmark (FY13 PE - SOP: 11.2x, plantation industry: 15.0x).
36% earnings growth in 2013. We believe 2013 will be a brighter year, fuelled by i) improving production, ii) better refining margins and iii) cheaper fertilizer costs, despite potentially softer average CPO prices on a y-o-y basis. Should we benchmark SOP to the plantation industry's average FY13 PE of 15.0x, its current share price implies average CPO prices of RM2,100 per tonne for 2013. Our FY13 earnings forecast is based on CPO prices of RM2,750 per tonne.]
Questions to OSK experts:
1. What do you mean by target price, its rationale and time frame?
2. Is TP a day-to-day shooting object?
3. Are you looking at its market price first and then make the TP call, or the other way?
4. Are you adjusting your TP according to what the market tells you?
5. You use a PE ratio of 13 to value SOP, what is the rationale? Why not 5, 20 or 30 or other value?
6. Can you really predict future price of palm oil?

Posted by houseofordos > 2013-03-02 19:00 | Report Abuse

Hi kcchongz, what is your view on SOP ? Do you have any projections on the intrinsic value ?

Posted by kcchongnz > 2013-03-03 12:40 | Report Abuse

houseofordos, if I were to do a simplistic valuation of SOP, its intrinsic value would be about RM4.70 (15%/10%*3.13). 15% is its average return of equity for the last three years, 10% is my required return for SOP, and 3.13 is its net asset backing per share. Very very rough. but don't forget, SOP has a very favorable age profile of its palm oil. It is going to have a very good growth for the next 10 years of >10% in terms of palm oil production. I have been charting its monthly production and the growth is real. Its EPS for last year was not that great and that was because palm oil price was low. Even that it still earned 36.5 sen per share. If palm price goes up above 3000 per ton, earnings for SOP will explode. So I think if you want to invest in palm oil company; and you want a growth company of the next 10 years or more, SOP would be the best at RM5.10. This is my opinion, you don't have to follow.

Posted by houseofordos > 2013-03-03 17:19 | Report Abuse

I agree on that part on the favaroble age profile but feel that upstream earnings this year may be challenged based on report I read from CIMB regarding the new expoert tax structure which tend to favor refiners (downstream) more. OSK's report put a lot of hype on SOP's downstream operations but I wonder how much downstream operations actually contributes to their bottom line. I cant find this information anywhere. Any idea ?

Posted by kcchongnz > 2013-03-03 18:48 | Report Abuse

What formula? A simple one. If you want to invest in a company with a book value of 100,000 and happy to get a return of 10%. Say the business promise to return you 15% of the book value at the end of the year, or 15000, how much are you willing to pay. I would say 15%/10%*100,000, or 150,000. Because if you pay 150,000, at the end of the year, the business returns you 15000 (15%*100000), that is 10% (15000/150000)you require. Hence the simple valuation using ROE is:

Value = (ROE/Required return)*Equity

Posted by Gabriel Khoo > 2013-03-03 20:34 | Report Abuse

Ok. Dont understand y u use this method. Anyway. Thx

Posted by kcchongnz > 2013-03-04 10:56 | Report Abuse

Gabriel, don't you see the simple logic? Think about if you want to buy a business. Sometimes a simplistic but logical way may be a better way.

Posted by Gabriel Khoo > 2013-03-04 17:01 | Report Abuse

Yes. But its seems like too conservative on the value. Isnt it?

Posted by kcchongnz > 2013-03-04 17:54 | Report Abuse

For valuation using ROE for SOP, I would fully agree with you it is conservative because this method has not taken into the consideration of the growth aspect of SOP as I have mentioned in the same post above. SOP will have a high growth in its palm oil production for the next few years. All valuation methods, whether a simple or more detail one, are subjective. Hence in my opinion, if you want to invest in a company, it is better to look at it at various angles. And also Benjamin Graham's concept of margin of safety.

Posted by Gabriel Khoo > 2013-03-04 19:26 | Report Abuse

Yup. Agreed.

Posted by kcchongnz > 2013-03-06 15:47 | Report Abuse

Babriel, just stumbled into this blog. A video to explain what I was trying to explain to you about valuation using ROE, intrinsic value etc.
http://myinvestingnotes.blogspot.co.nz/2013/03/uncovering-best-value-stocks.html

Posted by Gabriel Khoo > 2013-03-06 17:26 | Report Abuse

Thx

Posted by jeffthen > 2013-06-06 17:31 | Report Abuse

But then the dividend with only 6%=RM60? Where as if i'm right, 60/5500X100 only got about 1.09% return from your investment PA! I can be wrong!

Posted by kcchongnz > 2013-06-06 17:46 | Report Abuse

jeffthen, you are right. The dividend yield of SOP is a pittance. But when you invest in a company, are you looking for a total return or just high dividend yield? A high growth company cannot achieve its growth of high growth if most of its earnings is distributed to shareholders each year. High growth company need money for capital expenses and hence less free cash flow for distribution to shareholders. In SOP's case, it needs money for capital expenses without having to keep on borrowing money and issues new shares to increase its land bank, biological assets. Hopefully with these capital expenses, its revenue and income grows as time goes on with more earnings and hence increases its share price.

Posted by jeffthen > 2013-06-06 18:46 | Report Abuse

Thanks for the sharing kcchongnz... Appreciated that!

Posted by arv18 > 2013-06-06 22:59 | Report Abuse

thanks info and for the video. a great presentation, and easy for everyone to understand.

Posted by joe2703 > 2013-06-06 23:10 | Report Abuse

kcchongnz, thanks for your sharing. I've been looking at a few plantation counters and after reading your posts and I compared SOP & TDM with other plantation companies, actually they are not expensive. I believe they will be doing very well when CPO prices gone up and I like TDM the most and just bought some yesterday. Hopefully will have great return next year.

Posted by jeffthen > 2013-06-07 16:25 | Report Abuse

How about counter like Kretam and Rsawit? Both are small size company!

Posted by Gabriel Khoo > 2013-10-04 21:30 | Report Abuse

rsawit fundamental no good

Posted by anbz > 2013-10-15 18:59 | Report Abuse

overvalued...upside limited...profit...toooooooooo small...palm oil price depress

Posted by johnny cash > 2013-12-12 19:21 | Report Abuse

Sarawak Oil Palms (SOP MK)
Technical BUY with +18.4% potential return
Last price : RM6.59
Resistance : RM7.80
Support : RM6.03
Stop-loss: RM5.99
BUY with a target price of RM7.80 with a stop-loss below RM5.99. Following our earlier call to buy at RM5.93 on 6 Nov 13, SOP’s share price has hit our initial target price of RM6.60 yesterday. However, we expect the a further continuation to the upside since yesterday’s breakout above the previous high of RM6.50 was accompanied by higher trading volume of 0.7m shares (vs 20-day average of 0.3m) and rising momentum. Given the bullish crossover in the MACD, we expect buying interest to be intensified in the near term, and should thus propel the share price towards our new projected target of RM7.80 in the medium term.

UOB KAY HIAN REPORT DATED 12/12/13

Posted by Pen Biru > 2013-12-16 12:04 | Report Abuse

down..wait 4 enter price

Posted by Gabriel Khoo > 2014-03-18 22:46 | Report Abuse

Good comp

Posted by sosfinance > 2014-05-10 08:33 | Report Abuse

profit announced up 30%, share price drop, hmm…..

Posted by johnny cash > 2014-06-02 21:33 |

Post removed.Why?

Posted by johnny cash > 2014-06-02 21:36 |

Post removed.Why?

Posted by johnny cash > 2014-06-02 21:37 |

Post removed.Why?

Posted by johnny cash > 2014-06-02 21:38 | Report Abuse

 Huge milling capacity. With the completion of its sixth mill with a 90 tonne/hour
capacity located at Baram, Miri in 1Q14, SOP will now have a total milling capacity
of 2.79m tonne pa. Also, it has plans to construct a new mill with a capacity of 60
tonne/per hour and this is expected to be completed by 3Q15. Upon completion, this
will further increase its milling capacity to 3.15m tonnes. As more of its oil palm trees
are still young, SOP sources about 45-50% of its processed FFB from external
parties in order to maximise its mill utilisation rate. However, as more areas reach
maturity, internally-harvested FFB would be able to meet the milling requirement
and thus reduce the company’s reliance on external fruit for mill utilisation and
improve its profit margin.

Posted by johnny cash > 2014-06-02 21:39 | Report Abuse

GOOD MANAGEMENT AND ESTATE PRACTICE
 Good estate practices… Good estate management are important to ensure estate
productivity and efficiency. Regardless of mineral soil or peat soil, good estate
practices in manuring, estate upkeeping, water irrigation and drainage system and
harvesting practices would help to ensure high FFB yield. We believe that SOP has
good estate practices that support its productivity and efficiency, given that 70% of
its planted area is on peat land which tends to have lower yields.
 … help to increase FFB yield above state's level. SOP has been delivering
above-average FFB yield and oil yield for the past five years. Also, its FFB yields
are comparable to other states’ FFB yields with oil palm mainly planted on mineral
soils that usually are more fertile as compare to peat soils. SOP is the expert in peat
soil planting with its high FFB yield that is comparable to mineral soil. Plantation
companies tend to avoid peat soil planting as it tends to be more challenging due to
poor soil fertility, palm leaning and peat fire problems that lead to higher costs of
planting and cost of production. However, SOP has vast experience in peat soil
planting, and this has helped it to outperform its peers with better FFB yield.

Posted by johnny cash > 2014-06-02 21:41 | Report Abuse

STRONG BALANCE SHEET`
 Strong balance sheet to support any M&A opportunity and expansion plan.
SOP has a net gearing level of 0.3x due to the increase of trade lines as it is
venturing downstream. This is common for companies with downstream businesses.
Nevertheless, it has an adjusted net gearing level (excluding trade line) of 0.1x and
cash position of RM486m, indicating there is room for funding if any value accretive
opportunities come along.
 M&A opportunity to further grow landbank. SOP has about 20,000ha of
unplanted area and it targets to increase its planted area to 100,000ha within the
next five years. SOP is actively on the look out for land acquisition and it has
recently acquired 23,000 ha in Sarawak at RM29,558/ha. SOP has competitive
advantage in Sarawak as it has strong expertise in peat soil planting. 14% of land
area in Sarawak is made up of peat soil, and plantation companies tend to shy away
from Sarawak due to the difficulty of peat soil planting. As a peat specialist, SOP
has the competitive advantage to further expand its landbank in Sarawak.
 Potential further downstream expansion. SOP is evaluating other value-added
palm oil products for further expansion and to complete the value chain. Although
refining margin is thin, we believe that further expansion in refining capacity would
cater to SOP’s future growth once more oil palm trees reach maturity.

Posted by johnny cash > 2014-06-02 21:42 | Report Abuse

UPSTREAM PRODUCTION FOR DOWNSTREAM OPERATION
 Downstream expansion. In Jul 12, SOP commenced operations at its first refinery
with a total capacity of 450,000 tonne p.a. in Sarawak. This helped SOP to avoid the
margin squeeze by refiners as Sarawak is facing shortage of refining capacity.
Currently, contribution from downstream operation is rather insignificant as
compared to its upstream operation. In 2013, downstream operation reported PBT
of RM13m (9% of total PBT).
 Minimal impact from Wilmar’s new policy on buying CPO produced from oil palm
trees planted in forest areas and peat swamp land in the state from 2015 onwards.
Under the new policy, Wilmar will stop buying CPO produced from oil palm trees
planted in forest areas and peat swamp land in the state w.e.f. 31 Dec 15. However,
we believe this would have minimal impact on SOP. With the completion of its own
refinery, majority of CPO produced by SOP is channelled back to its own refinery.
Therefore, SOP is unlikely to be affected by the new policy. SOP’s refinery has a
total capacity of 450,000 tonnes, which is more than enough to support its existing
production.

Posted by johnny cash > 2014-06-02 21:42 | Report Abuse

VALUATION
 Our target price of RM7.80 pegs SOP at 14x 2015F PE, its 10-year +1SD forward
PE. This is also at a slight discount to mid-size plantation companies' 15x PE.
Currently SOP is trading at 11.9x PE, similar to its peers. During the CPO price
uptrend back in 2011-12, SOP was trading between 15-26x PE and reached its
peak of 26x PE in Jan 12. We believe that there is still upside for SOP during this
CPO price uptrend.
 Its EV/planted ha of US$14,594 represents a 27% discount to the peers’ average of
US$19,373/ha. However, SOP is rather illiquid with an average 6-month average
daily trading volume of 183,134 shares, and it has a dividend yield of 0.7% vs its
peers’ 0.9-5.6%.

Posted by johnny cash > 2014-06-02 21:43 | Report Abuse

 Results slightly below expectation. SOP reported net profit of RM33.7m (-7.7%
qoq, +59.7% yoy), slightly below our expectation but we believe that better pricing
and higher production in the coming quarters would continue to support its
performance. The strong yoy growth in net profit was mainly supported by:
- Strong FFB production growth of 18.4% yoy on the back of the increase in new
mature area by about 4,000ha (7% of total mature area) and its young age profile.
It is on track to meet our expectation growth of 16-18% yoy for 2014.
- Higher CPO ASP of RM2,681/tonne. It was up 6.4% qoq and 29.7% yoy in 1Q14¸
which helped to boost the net profit for the quarter.

Posted by johnny cash > 2014-06-02 21:43 | Report Abuse

OUTLOOK
 3-year EPS CAGR of 37% from 2014-16F. We are expecting net profit of RM208m,
RM246m and RM234m for 2014, 2015 and 2016 respectively. We are expecting
sharp increase in 2014F net profit on the back of better FFB production growth of
16% yoy (vs 8% yoy in 2013) and higher CPO price assumption of RM2,950/tonne
(vs RM2,143/ tonne ASP CPO in 2013). Lower yoy net profit in 2016F is mainly due
to lower CPO price assumption of RM2,800/tonne.

Posted by johnny cash > 2014-06-02 21:44 | Report Abuse

 Key earnings contribution to come from upstream operation. We are expecting
more than 90% of its EBIT to continue coming from its upstream operation. The
downstream operations, despite their relatively small impact on earnings, would
provide earnings diversification benefits for SOP.

Posted by johnny cash > 2014-06-02 21:45 | Report Abuse

 Net gearing to remain low. Its gearing level has been on the rising trend over the
past two years mainly due to the need to fund the investment for its refinery and the
increase in trade line. However, its adjusted net gearing level (excluding trade line)
remained low at 0.1x.
 Capex allocation of RM300m. SOP has allocated a capex of RM300m for 2014 for
expansion of its mills and refinery and new planting activities.
 No fixed dividend policy. SOP does not have a fixed dividend policy. However,
based on historical trend, SOP increases its gross dividend by 1 sen every year. In
2012, its net dividend payout was 13%.
 High leverage to CPO price movement. SOP’s earnings are sensitive to CPO
price fluctuation. For every 10% increase in CPO price, SOP's EPS would increase
by 14%.

Posted by johnny cash > 2014-06-02 21:46 | Report Abuse

RISK FACTORS
 Volatile earnings due to young age profile. Earnings for a young plantation
company tend to be more volatile as it does not have a strong earnings base due to
its small prime area.
 Dependence on third-party crops. SOP’s margin might be squeezed due to its
heavy reliance on third-party crops for its mills operation.
 Fall in CPO price. Pure upstream plantation companies tend to be more sensitive
to CPO price movement. Any fall in CPO price would have a negative impact on
SOP’s earnings. For every 10% decrease in CPO price, SOP’s 2015F EPS would
fall by 19%.
 Adverse weather condition such as tsunami, El Nino and La Nina and their
consequences (ie forest fires, flooding, etc) would have an adverse impact on its
plantations’ operations.

Posted by johnny cash > 2014-06-02 21:47 |

Post removed.Why?

Posted by johnny cash > 2014-06-02 21:48 |

Post removed.Why?

Posted by roguetrader > 2014-08-20 20:34 | Report Abuse

Bearish CPO outlook offers opportunity to buy. SOP at this level is already huge discount.

Posted by chenwei > 2014-08-26 02:35 | Report Abuse

Just sold SOP at July at 6.75 and switch to UMCCA. Now still left some and observing. Just curious why the price keep dropping, can anyone tell me is it affected by the Indonesian new law to limit foreign investor holding limit in plantation company?

Posted by HamSubBoy > 2014-08-28 21:59 |

Post removed.Why?

Posted by pkaseong > 2014-09-30 12:28 | Report Abuse

anybody can tell me why today this counter no trade ?

Posted by Ah Ha > 2014-10-24 15:28 | Report Abuse

CPO Price drop somemore. next q result will be red.. careful.

Posted by yongyou > 2014-10-24 19:40 | Report Abuse

Hi Ah Ha, thanks for the info. Am always monitoring this counter but yet to enter.

Posted by Ah Ha > 2014-12-02 12:21 | Report Abuse

time to wait for TP5.10 & collect... almost good to be in...

Posted by Ah Ha > 2014-12-10 21:03 | Report Abuse

almost there... hold on and start collect when TP 5.10.. Cheers.

Posted by Ah Ha > 2014-12-12 16:40 | Report Abuse

revised. TP 4.80.. cheers..