Sector: Plantation
GICS: Consumer Staples/Agricultural Products
Market Value - Total: MYR294.0 mln
Summary: NPC Resources (NPC) is one of the smaller oil palm plantation groups in the country. NPC operates 8,774 hectares (ha) of oil palm plantations and two palm oil mills with a combined production capacity of 120 tons/hour in Sabah. NPC also owns the Berjaya Palace Hotel Kota Kinabalu and a fish rearing business.
Analyst: Siti Rudziah Salikin
Price: MYR2.45
12-Month Target Price: MYR2.72
Recommendation: HOLD
Date: July 9, 2008
Highlights
NPC has relatively young oil palm estates in Sabah. About 59.6% of the 7,533 ha of planted palms are between the ages of 1-12 years.
The growth in crop production is expected to resume in 2008 and continue into 2009 due to an overall recovery in FFB yields, an increase in young mature areas entering their peak production period and new area coming into maturity.
We expect CPO price, which averaged MYR3,500/ton in 1H08 versus MYR2,200/ton in 1H07, to soften in 2H08 to coincide with the peak production period of oil palm. Another potential bearish factor is the proposal by the European Union (EU) to review its biofuel target (of 10% of transport fuel by 2020). We forecast an average CPO price of MYR3,200/ton for 2008 and MYR3,000/ton for 2009.
We project a 69.6% YoY growth in NPC’s net profit for 2008 to MYR56.3 mln and a lower net profit of MYR52.7 mln for 2009, down 6.4% YoY.
Investment Risks
Risks to our recommendation and target price include a sharp reversal of the current strength of CPO price, which could be caused by increased global acreage of oilseeds. The volatile energy prices will also caused a fluctuation in not only CPO price but also fertilizer costs.
Recommendation
We resume coverage on NPC with a Hold recommendation and a 12- month target price of MYR2.72.
The stock’s low single-digit PER reflects its small market capitalization and low trading liquidity. We use a discounted cash flow method to value NPC, assuming: (i) a long-term CPO price of MYR2,500/tonne; and (ii) a WACC of between 8.7% and 9.8%. We arrive at an intrinsic value of MYR315 mln or MYR2.62 per share and add our projected dividend of 10 sen per share for 2008 to arrive at a 12-month target price of MYR2.72 for the stock. Implied PER of 6.2x on projected earnings for 2009 is within the valuation range of 5x-8x for small cap plantation stocks.
We expect NPC to be in a net cash position in 2008 given the strong cash inflows from the plantation operations and relatively small capex needs. We assume the previous two years’ payout of around 21.6% will be sustained and project a 10 sen per share dividend for 2008, offering a decent yield of 4.1%.
The group’s corporate social responsibility practices form part of its environmental conservation efforts, including: (i) zero burning; (ii) soil and water conservation methods; (ii) recycling of empty fruit bunches back to the plantations; (iv) self-sufficiency in energy inputs in its palm oil mills; and (v) where practical, using buffaloes for infield FFB evacuation to reduce the consumption of non-renewable fuel.
Background
NPC Resources (NPC) is one of the smaller listed plantation groups. It operates 8,774 ha of oil palm plantations and two palm oil mills in Sabah. NPC also owns a three-star hotel in Kota Kinabalu and a fish rearing business.
The group was founded by Loo Ngin Kong (NPC’s Executive Chairman) and Wong Siew Ying (NPC’s Executive Director), who started the palm oil business in 1981 with just 161.88 ha of plantation land. The plantations were expanded over the years through acquisitions of controlling stakes in companies with plantation lands within the vicinity of Sabah. Future expansion of its plantation land is expected to come from Indonesia, whereby NPC is currently looking at suitable land bank for acquisitions.
Mr Loo’s son, Dato’ Loo Pang Kee is the current Managing Director and runs the day-to-day operations of the group. NPC was listed on the Main Board of Bursa Securities in May 2002.
Oil palm plantations
NPC has 7,533 ha of planted oil palms, of which 94.3% are mature. The mature estates are relatively young. About 53.9% or 4,060 ha of the planted palms are between the ages of four and 12 years and 5.7% are still immature (1-3 years). Oil palms normally reach their peak maturity, in terms of FFB yields and oil extraction rates, at between seven and 15 years. About 300-400 ha of the palms are old and will be replanted in 2009 and 2010.
FFB yield for NPC’s estates was 22.77 tons/ha in 2007, in line with the average for Sabah. The yield was lower than the 23.25 tons/ha recorded in 2006 but the drop was also recorded by the industry during the year. This was due to the effect of a biological yield downcycle, which occurs every 4-5 years. The yield has since recovered. For NPC, the improvement in yields will also come from the gradual increase in young mature areas entering their peak production period. Together with new area coming into maturity, the growth in FFB production is expected to resume in 2008 and continue into 2009. FFB production in the first five months of 2008 was up 7.3% YoY at 63,999 tons.
NPC’s FFB yield trend
The FFB are processed at NPC’s own two palm oil mills, which have a combined capacity of processing 120 tons of FFB per hour. NPC plans to increase the mills’ capacity to 180 tons/hour in mid-2009 to cater to the increase in FFB production, including that from outside purchase. The mills rely considerably on supply of FFB from external plantations as FFB from NPC’s own estates are insufficient to meet the mills’ requirements. Nonetheless, third party purchases have gradually reduced to about 68.5% of the total FFB processed for 2007 compared to 78.5% in 2004. Contributing to the lower external purchase in 2007 was the drop in FFB supply (due to the earlier-mentioned drop in yield for the industry) and competition from other palm oil millers. Its CPO output declined 9.1% YoY to 107,676 tons while palm kernel dropped 7.5% YoY to 25,706 tons. The CPO and palm kernel are sold entirely to local refineries.
Ancillary activities
NPC ventured into hotel operations in March 2007 when it acquired 100% of The Palace Venture Sdn. Bhd [formerly Berjaya Resort (Sabah) Sdn Bhd]. Palace Ventures owns a three-star, 160-room Berjaya Palace Hotel Kota Kinabalu. The hotel’s occupancy rate was about 60% then and is expected to improve once the on-going renovation and facilities upgrade is completed later in 2008.
The fish rearing and breeding businesses are undertaken by 100%-owned Miracle Display Sdn Bhd and 70%-owned Better Prospect Sdn Bhd, which were acquired in February 2006. The two subsidiaries collectively own 100 marine fish rearing cages located at two acres of designated area of the sea off Pulau Berhala in Sandakan. The fishes, mainly grouper, are exported to Hong Kong and China. In December 2007, Better Prospect acquired fishery stock and fixed assets from Protects Enterprise Sdn Bhd (PESB). The transfer of technical know-how of fish fry breeding and rearing from PESB will provide an opportunity for the group to expand the fish breeding capacity without relying on external supply of fish fry.
Earnings Outlook
NPC’s earnings are highly susceptible to the movement of palm oil prices. Thus, in spite of the lower production in 2007, NPC recorded a 65.2% YoY growth in net profit to MYR33.2 mln as the average CPO selling price increased 64.2% YoY to MYR2,416/ton. Both the hotel operations and fish rearing business recorded a small loss but the impact on the group’s earnings was immaterial.
NPC’s 1Q08 net profit was MYR10.0 mln, up 1.1x YoY. Earnings are expected to accelerate in the remaining quarters because of seasonally stronger production period in the 2H of the calendar year. The recovery of FFB yield will not only increase crop production from NPC’s own estates but also provide a higher supply of FFB from external plantations. We expect CPO output to rise 16% YoY to about 125,000 tons in 2008 but project a smaller 3.1% YoY increase for 2009 partly due to the replanting of older palms.
CPO price has been strong, averaging MYR3,500/ton in 1H08 versus MYR2,200/ton in 1H07. We still maintain our view that CPO price will soften in the latter half of 2008 to coincide with the peak production period of oil palm in Malaysia and Indonesia. Other potential bearish factors are the crude oil price slide and the call by European Parliament for the EU to lower its biofuel target (of 10% of all transport fuel from renewable sources by 2020), which is blamed for driving up food prices. However, we see the potential for a sharp price correction to be limited given strong underlying demand and the current tight supplies of other edible oils. Adverse weather conditions, which have delayed soybean plantings in the U.S., also lend a support to the CPO price. We forecast an average CPO price of MYR3,200/ton for 2008 and MYR3,000/ton for 2009.
We project a 69.6% YoY growth in NPC’s net profit for 2008 to MYR56.3 mln and a lower net profit of MYR52.7 mln for 2009, down 6.4% YoY.
Valuation
The stock currently trades at a low single-digit PER, reflecting NPC’s small market capitalization and the stock’s low trading liquidity. We use a discounted cash flow method to value NPC, assuming: (i) a long-term CPO price of MYR2,500/tonne; and (ii) a WACC of between 8.7% and 9.8%. We arrive at an intrinsic value of MYR315 mln or MYR2.62 per share and add our projected dividend of 10 sen per share for 2008 to arrive at a 12-month target price of MYR2.72 for the stock. Implied PER of 6.2x on projected earnings for 2009 is within the valuation range of 5x- 8x for small cap plantation stocks.
NPC’s balance sheet is healthy. We expect NPC to be in a net cash position in 2008 given the strong cash inflows from the plantation operations and relatively small capex requirements of about MYR5 mln for 2008 (mainly for the hotel refurbishment) and MYR10 mln for 2009 (to upgrade its palm oil mills and replant old palms). The company does not have a fixed dividend policy but expects to pay a higher dividend for 2008. We assume the previous two years’ payout of around 21.6% will be sustained and project a dividend of 10 sen per share for 2008 versus 6 sen for 2007.
Recent Development
May 2008: NPC announced 1Q08 results. Net profit rose 94.7% YoY to MYR10.0 mln on the back of a 1.1x YoY increase in revenue to MYR103.6 mln driven by higher CPO and palm kernel output and better selling prices.
December 2007: NPC’s subsidiary, Better Prospect Sdn Bhd acquired fishery stock and fixed assets from Protects Enterprise Sdn Bhd for MYR1.2 mln, which was satisfied by cash and a 30% stake in Better Prospect. NPC’s stake in Better Prospect was diluted to 70%.
old topic
Astro邀请你出席《溏心夜宴》 ◆COSPLAY大擂台再現
星洲互動 ｜ 星洲日報 ｜ 光明日報 ｜ 柬埔寨星洲日報 您在這裡： 主頁 ｜新聞
洽購東源集團
IOI集團看好可增值 推薦給朋友 列印
updated:2005-09-02 12:36:29 MYT
（吉隆坡訊）市場盛傳IOI集團（IOICORP，1961）有意收購東源集團（NPC，5047），有關計劃雖未獲證實，分析員已一片唱好，主要是東源集團的棕油廠業務和未達成熟樹齡的油棕園坵，可為IOI集團業務增值及實現實質利益。
市場消息指出，IOI集團（IOICORP，1961）已和東源集團（NPC，5047）洽商收購事宜，預料雙方將在近期內作出宣佈。
據悉，IOI集團兩週前，已派代表前往東源集團進行精密審核，研究其可行性以及視察園坵和產業。
收購符合擴展計劃
分析員認為，該收購計劃動機並非純粹放眼盈利提升，棕油廠是東源集團最寶貴的資產，其煉油陳能每小時可提煉100噸的鮮果串，並貢獻80%的集團營收貢獻。
他們預料其可舒緩IOI集團的產能壓力，因其大部分棕油廠的產能已接近頂峰。
IOI集團也可應用營運棕油廠的專長，提升東源集團的榨油收益，後者目前的榨油收益僅達18%，相比下，IOI集團在沙巴州園坵已取得22%的榨油收益。
東源集團目前在沙巴州擁有8700公頃的種植園坵，約30%種植範圍只有4至7年的樹齡，比IOI集團的園坵相對年輕。
分析員認為，該收購消息符合IOI集團的擴展計劃，目前在沙巴州擁有13萬6333公頃的種植地段。
沙巴州的油棕園售價目前處於每公頃3萬4000令吉，預料IOI集團將付出3億餘令吉收購價，也比2002年的收購代價廉宜。
以週二的閉市價1.88令吉計算，東源集團的市值只達2億4000萬令吉，IOI集團的報價出現6.4%的溢價水平。
據悉，原棕油價格低於預期是東源機構管理層醞釀脫手的原因。
東源集團是沙巴州一家小規模的種植公司，其淨利只達IOI集團2005財政年淨利9億零220萬令吉的1.1%
截至2004年12月杪止的財政年度，該公司取得1020萬令吉淨利。2005財政年6個月的淨利則達到480萬令吉，較前期增長5倍。
東源集團股價近兩個月飆漲71%，分析員預料，不尋常股價走勢或與收購計劃有關，該公司股價今年原本徘徊于1令吉10仙左右，自7月11日揚升14%後就不斷飆漲，8月中達到2.02令吉的全年最高價位。
大馬股票交易所今年8月16日首次“點名”警告投資者，避免過度投資某些投機股項，東源機構是其中一個股項。 （星洲日報／財經‧2005/09/02）
No comments:
Post a Comment