We maintain HOLD on Chin Teck Plantations (CTP) with an unchanged fair value ofRM8.36/share, based on a FY25F PE of 10x - the simple average of small cap plantation companies over the past 5 years. We ascribe a neutral 3- star ESG rating to CTP.
In this report, we compare the valuations, operational metrics and dividends of CTP with its sister company, Negri Sembilan Oil Palms (NSOP).
We find CTP to be a more interesting investment proposition compared with NSOP. In spite of this, we are not upgrading CTP to a BUY as its liquidity is low and the size of its planted areas is small.
CTP is currently trading at a FYE8/25F PE of 8.9x. In comparison, NSOP trades at a higher FYE12/25F PE of 11.5x assuming a 20% net profit growth. CTP’s P/BV is 0.8x vs. NSOP’s 0.5x. CTP’s return on equity was 6.4% in FYE8/23 against NSOP’s 3% in FYE12/23.
CTP is larger than NSOP. CTP has 12,021ha of planted areas vs. NSOP’s 7,174ha. We estimate CTP’s gross profit per mature ha at RM8,624 in FYE8/23 compared with NSOP’s RM5,940 in FYE12/23. Based on the gross profit, CTP’s cost is estimated to be RM2,502/tonne in FYE8/23 vs. NSOP’s cost of more than RM3,000/tonne.
CTP has a bigger proportion of young oil palm trees compared to NSOP. 26% of CTP’s planted areas are in the prime age of 11-15 years vs. NSOP’s 14%. Another 22% of CTP’s are 6-10 years old compared to 23% for NSOP. 22% of CTP’s oil palm trees are more than 20 years old vs. 12% for NSOP.
Supported by young trees, CTP’s FFB yields and OERs are higher than NSOP. In FYE8/23, CTP’s FFB yield was 19.1 tonnes/ha while its OER was 19.1%. In contrast, NSOP’s FFB yield was 16.9 tonnes/ha while its OER was 18% in FYE12/22.
CTP’s dividend yield was 2.7% (gross DPS: 20 sen) with a payout ratio of 34% in FYE8/23. In comparison, NSOP’s dividend yield (gross DPS: 12 sen) was 3% and its payout ratio 47% in FYE12/23.
CTP is currently trading at a fair FY25F PE of 9x, which is marginally below its 2-year average of 10x.
This book is the result of the author's many years of experience and observation throughout his 26 years in the stockbroking industry. It was written for general public to learn to invest based on facts and not on fantasies or hearsay....