Glenealy Plantations (Malaya) Bhd (Nov 3, RM5.80)
Maintain buy with fair value RM7.25: Glenealy registered strong year-on-year (y-o-y) growth both at the top and bottom line, although this performance was slightly weaker on a sequential basis amid declining crude palm oil prices and fresh fruit bunch (FFB) production.
The company’s earnings and production came in within expectations, with FFB production rising by a healthy 12.8% y-o-y. The stock remains cheap, especially in terms of enterprise value (EV) per planted ha, being the least expensive among plantation companies within our coverage from this viewpoint. Maintain “buy” with a fair value of RM7.25.
Glenealy’s 1QFY12 earnings made up 27.3% of our full-year FY12 forecast, soaring by 156.5% y-o-y but rising at a softer 1% sequentially. Revenue surged 68.2% y-o-y but declined by 6.7% quarter-on-quarter (q-o-q) despite the positive sequential CPO sales volume growth as the company’s realised prices fell 6.7%.
As FFB production had historically skewed towards 1HFY12, our expectations of CPO prices weakening in 2HFY12 should see Glenealy’s earnings in the second half account for less than half of our full-year earnings estimates. Our current projected FY12 average CPO price is RM2,950 per tonne, lower than the RM3,107 achieved so far.
Glenealy’s FFB production slipped 2.9% q-o-q after experiencing a strong 20.1% sequential growth in the previous quarter. Nonetheless, production rose 12.8% on a y-o-y basis, which is in line with our 10.9% growth estimate.
Even though production is entering a traditional upcycle, the q-o-q decline may have been partly due to the month of Ramadan in August, during which the availability of labour for harvesting was somewhat affected. Some 60% of the company’s FFB comes from Sabah, where production could have been hit by the tail-end effects of the drought in 1QCY10.
We are keeping our FY12 and FY13 forecasts unchanged. Glenealy’s share price has been well supported despite the current economic headwinds, partially owing to its low beta and dry trading volume. Along with its strong balance sheet and cheap EV per planted ha of US$5,800 (RM18,270), we maintain our “buy” call, with a fair value of RM7.25, based on 12 times FY12 price-earnings ratio. — OSK Research, Nov 3
This article appeared in The Edge Financial Daily, November 4, 2011.
Maintain buy with fair value RM7.25: Glenealy registered strong year-on-year (y-o-y) growth both at the top and bottom line, although this performance was slightly weaker on a sequential basis amid declining crude palm oil prices and fresh fruit bunch (FFB) production.
The company’s earnings and production came in within expectations, with FFB production rising by a healthy 12.8% y-o-y. The stock remains cheap, especially in terms of enterprise value (EV) per planted ha, being the least expensive among plantation companies within our coverage from this viewpoint. Maintain “buy” with a fair value of RM7.25.
Glenealy’s 1QFY12 earnings made up 27.3% of our full-year FY12 forecast, soaring by 156.5% y-o-y but rising at a softer 1% sequentially. Revenue surged 68.2% y-o-y but declined by 6.7% quarter-on-quarter (q-o-q) despite the positive sequential CPO sales volume growth as the company’s realised prices fell 6.7%.
As FFB production had historically skewed towards 1HFY12, our expectations of CPO prices weakening in 2HFY12 should see Glenealy’s earnings in the second half account for less than half of our full-year earnings estimates. Our current projected FY12 average CPO price is RM2,950 per tonne, lower than the RM3,107 achieved so far.
Glenealy’s FFB production slipped 2.9% q-o-q after experiencing a strong 20.1% sequential growth in the previous quarter. Nonetheless, production rose 12.8% on a y-o-y basis, which is in line with our 10.9% growth estimate.
Even though production is entering a traditional upcycle, the q-o-q decline may have been partly due to the month of Ramadan in August, during which the availability of labour for harvesting was somewhat affected. Some 60% of the company’s FFB comes from Sabah, where production could have been hit by the tail-end effects of the drought in 1QCY10.
We are keeping our FY12 and FY13 forecasts unchanged. Glenealy’s share price has been well supported despite the current economic headwinds, partially owing to its low beta and dry trading volume. Along with its strong balance sheet and cheap EV per planted ha of US$5,800 (RM18,270), we maintain our “buy” call, with a fair value of RM7.25, based on 12 times FY12 price-earnings ratio. — OSK Research, Nov 3
This article appeared in The Edge Financial Daily, November 4, 2011.
