I have been getting some comments and questions with regards to my recent Golden Agri pickup. There’s no real right answer as to which one is the best, it’s really a matter of opinion and preference. This is a short post with an extract from a CIMB CPO research report.
CPO Planters Table Extract from CIMB Research (Click on the picture to enlarge)
Valuations, Income and Plantation Profile
For example, if you are looking for value, you should be focusing on low valuation ratios. If you are looking for stable income, then you should pick those with reasonable dividend yield and that at least 30% of the portfolio is prime so that it is able to give out income on a steady basis.
If you are looking for high growth, the largest % of portfolio being immature and young should be ideal. Also look out for those with large unplanted land bank as they should be able to plant those without resorting to acquisitions. Bear in mind though planting also requires significant amount of capex, so they may not be able to dividend much cash due to the planting capex.
Another factor which should not be neglected is the downstream capability of palm oil companies. Not all primary producers have downstream capabilities, so they are not able extract value from refining of palm oil. With regards to Golden Agri, 30% of the revenue for YTD Sep 2012 comes from refined palm oil products, while CPO makes up 40% of the revenue. So it is definitely significant and branding too is very important here. For example, Golden Agri’s cooking oil brands Filma and Kunci Mas are market leaders in Indonesia.
Other factors include Malaysian CPO export tax policy risks. For more information on this, see Star Report
For further reading, you may be interested in: