United Plantation - Sustainable Dividen?

 

Company : United Plantation – Sustainable Dividen?

Business:

Well established mid-sized plantation company with estates in Malaysia (71%) and Indonesia (29%). In Malaysia the estates are located in Perak and Selangor. In Indonesia, they are located in central Kalimantan. 90% of the estates are oil palm and remaining 10% are coconut. They have palm oil mills for their own FFB processing and oil refinery.

 

 

Fundamental:

Company has huge cash pile of RM478 million. Strong cash flow and no problem of giving dividen!

 

Revenue spike in 2021 due to high CPO price. Profit margin is pretty stable at average of 25%.

Challenges:

• Shortage of labour which affect harvesting
• Fertilizer price hike

 

Lates Q4 result:

This company does not issue Q4 result. Instead, they published annual report straight away. A bit confusing but this show how efficient they are!

 

Prospect:

The Ukraine-Russia war has an immediate effect on CPO because Ukraine and Russia are major sunflower oil producers. As a result of war, Ukraine cannot do farming and this will take at least 1 year to recover.

CPO price usually go in tandem with Crude Oil price. Due to sanction on Russia, oil price will remain high. High crude oil price will force Indonesia to curb their CPO export due to domestic demand and benefit Malaysia exporters. Complicated huh?

  

• CPO price is record high. Even at RM5,000 per tonne. Company will make huge profit. Based on their report, their average selling price is only RM3,309 due to hedging.
• Company practise hedging and therefore the risk of sudden drop of CPO will not have immediate effect on the company.
• Technical know-how to drive production efficiency. See note from their annual report.

 

CPO YIELD IS HIGHER THAN PEERS

 

 

PEERS FFB & CPO YIELD

 

 

FORWARD SALES PRICE – HEDGING

Below note explains why their CPO selling price is lower than peers.

 

Very Interesting Fact of Palm Oil Vs Soy Bean Oil

 Dividen:

Dividen policy is 70-80% payout of its profit. This is very high compare other plantation company. In fact payout ratio for 2021 is a whopping 92%!!

 

Forecast Dividen for 2022 shall be at least 115 cent which is 7.6% based on current price of RM15.

 

 Technical Analysis on Chart:

 

At time of writing, I own UTDPLT shares. Buy at your own risk.