Sarawak Oil Palms

[winston]

not vested

May 23, 2019

Results Review

Sarawak Oil Palms (SOP MK)
Share Price: MYR2.37
Target Price: MYR3.00
Recommendation: Buy

Hurt by low CPO price and output

1Q19 core net profit came in below our and consensus expectations, hurt by low CPO price and weak output.

We expect better quarters ahead on stronger price and output.

We believe SOP’s valuations are attractive as it trades at just 0.6x PBV and an adjusted EV/planted ha of below MYR20,000 (below replacement cost).

Maintain BUY with an unchanged MYR3.00 TP on 17x 2019 PER, its 4-year historical mean.

Source: Maybank

https://factsetpdf.maybank-ke.com/PDF/1 ... 2fae80.pdf

[winston]

not vested

RHB Research raises target price for Sarawak Oil Palms to RM5.40

by Hamsaveni Visuvaseven

KUALA LUMPUR (Jan 6): RHB Research has maintained its "buy" call for Sarawak Oil Palms Bhd at RM4 with a higher target price of RM5.40 (from RM4.85), on the back of the stock's sensitivity to the crude palm oil (CPO) price uptrend and better contributions from its downstream expansion plan.

In a note today, RHB Research's analyst Hoe Lee said the target price of Sarawak Oil Palms was raised based on 16 times FY21F price-to-earnings, in line with that of its small-cap peer average which implies US$9,000 enterprise value over hectare (EV/ha) is at the low end of its peer range.

Sarawak Oil Palms is still trading below its Global Financial Crisis trough price-to-book value of 1.1 times.

“We continue to like Sarawak Oil Palms, for its sensitivity to the CPO [Crude Palm Oil] price uptrend and better contributions from its downstream expansion plan. It is trading at an attractive 12 times FY21F price-to-earnings, vs peers’ 11-18 times,” she said.

Hoe noted that Sarawak Oil Palms was unable to realise full production potential as year-to-date November 2020 fresh fruit bunch output rose by 1.9% year-over-year, being affected by floods in August to September last year, and foreign hiring restrictions that led to a more pronounced labour shortage of about 15-20% (vs the usual 10%).

“While current weather patterns are manageable without any major floods, management remains cautious on labour workforce uncertainties and expects a conservative 3-5% fresh fruit bunch growth for FY21F. We tweak our assumptions to 1-4% growth for FY20-21F,” she explained.

Hoe said Sarawak Oil Palms is guiding for RM220 million in capex for FY21, which comprises new refining capacity of 800 tonnes/day (to be completed in 3Q21) and extra 300 tonnes/day for its biodiesel plant expansion (completed by end-2020), on top of the usual upstream maintenance — she revised FY20-22 earnings forecasts by 4-13%.

Hoe also pointed out that Sarawak Oil Palms will have modest forward sales as the planter has locked in 30% of its production for 4Q20, while committing about 20% of output for 1H21.

Preferably, Sarawak Oil Palms waits to see price trends first as the company has stopped forward sales for the time being, said Hoe.

“Management expects production cost (including PK credit) to narrow in FY21, targeting RM1,500/tonne (from 9M20 RM1,600/tonne) on the back of higher yield/ha and cost savings,” said Hoe, referring to Sarawak Oil Palms’ cost reduction plan.

At 10.37am, Sarawak Oil Palms added 1.5% or 6 sen to RM4.06, giving it a market capitalisation of RM2.32 billion.

Source: The Edge

https://www.theedgemarkets.com/article/ ... alms-rm540

[winston]

not vested

Sarawak Oil Palms (SOP MK/BUY/Target: RM5.20).

Among all Sarawak plantation companies, we reckon that SOP has one of the best estate management practices.

SOP also has high earnings sensitivity towards high CPO prices and high beta to CPO price as well.

Source: UOBKH

[winston]

not vested

Looking forward to an even better year in FY21
FY20: Posted one of its highest profits in history

4Q20 core PATMI would have been MYR58m if not for accounting FV loss on derivative FI (MYR39m).

Despite this, SOP posted one of its highest core PATMI in history in FY20 (MYR197m; +139% YoY).

Positively, the FV loss will likely reverse in FY21E.

Coupled with higher CPO ASP, we expect SOP to deliver 16% EPS growth for FY21E.

Trading at just 10x PER, we maintain our BUY on SOP with a higher TP of MYR5.59 on 14x 2021 PER peg, its updated historical 5Y mean (from MYR5.36 on 15x 2021 PER).

Source: Maybank

https://factsetpdf.maybank-ke.com/PDF/2 ... 0dd178.pdf

[winston]

vested

Sarawak Oil Palms buys remaining stake in SOP Sabaju for RM45.88m

by Tan Siew Mung

Source: theedgemarkets.com

https://www.theedgemarkets.com/node/565874

[winston]

vested

Sarawak Oil Palms maintains cautious outlook for 2021

“The business environment is expected to be challenging amid the labour shortages across the industry exacerbated by the Covid-19 pandemic.

SOPB posted a group profit after tax of RM220.16 million for the financial year ended Dec 31, 2020, compared to RM91.59 million in 2019 although its revenue fell 6.5 per cent to RM2.78 billion.

It attributed the improvement in profit mainly to the higher palm products’ prices realised during the year.

The average realised price for CPO was RM2,729 per tonne compared to RM2,122 per tonne in 2019.

Source: Bernama

https://www.malaymail.com/news/money/20 ... 21/1970737

[winston]

vested

Sarawak Oil Palm (SOP MK)
Sells More In The Spot Market; Benefits From High CPO Prices

SOP has submitted relevant documentation to recruit foreign workers to overcome
the current labour shortage.

As the only biodiesel supplier in the Sarawak region, SOP has completed its biodiesel capacity expansion in expectation of full implementation of the B20 biodiesel programme in Malaysia.

As a pure Malaysia plantation player, SOP has stopped forward selling so it will benefit from the high CPO prices. Maintain BUY.

Target price: RM4.75.

Source: UOBKH

https://research.uobkayhian.com/content ... b6824f07de

[winston]

vested

Buys out 40% MI stake in SOP Sabaju for MYR46m cash

Immaterial bottom line impact for now

We are positive on SOP’s proposed acquisition to buy out 40% minority interest (MI) in SOP Sabaju for MYR46m cash.

Despite it being a RPT transaction, the price is fair at MYR44,600/ha, at 15.6x
historical PER and will likely be immediate EPS accretive to SOP; albeit immaterial
to the bottom line.

Trading at just 10x FY21 PER, we maintain our BUY and TP of MYR5.59 on 14x 2021 PER peg, its historical 5Y mean.

Source: Maybank

https://mkefactsettd.maybank-ke.com/PDFS/219415.pdf

[winston]

vested

Higher CPO price bodes well for Sarawak Oil Palms

According to UOB Kay Hian (UOBKH) research, the company’s net profit could jump by as much as 32% with a CPO price assumption of RM3,500 per tonne.

PETALING JAYA: Sarawak Oil Palms Bhd (SOP) would be one of the key beneficiaries of a sustained higher crude palm oil price (CPO).

According to UOB Kay Hian (UOBKH) research, the company’s net profit could jump by as much as 32% with a CPO price assumption of RM3,500 per tonne.

“We expect SOP earnings to increase 13% year-on-year (y-o-y) for 2021.

“We expect higher y-o-y earnings from the upstream operation, leveraging on high palm oil product prices, ” it said.

“Besides, SOP guided that the group had stopped forward sales and there is some carry forward sales volume from late 2020 (less than 25% of 2020’s total production) which will be committed in 2021, ” UOBKH added.

It also noted that SOP’s management had guided fresh fruit bunches (FFB) production for this year would be at 1.45 million tonnes or a 7% y-o-y FFB production growth which also takes into consideration the present labour shortage it is facing.

“Assuming SOP is able to bring in more foreign workers this year, there will be more upside in its FFB production. But we remain conservative factoring in 4% y-o-y FFB production growth for 2021, ” it said.

“We maintain our earnings forecasts for 2021-2023 at RM244mil, RM163mil and RM175mil respectively, ” it added.

The research house maintained its “buy” rating on the stock with a target price of RM4.75, based on an 11 times forecast 2021 price to earnings ratio, or a negative 1 standard deviation of the stock’s five-year mean level.

It noted that SOP has submitted relevant documentation to the authorities to recruit foreign workers while incentives have also been given to the existing labour force in an effort to retain them.

“According to our channel checks, plantation companies are allowed to bring back labour with the approval of the relevant authorities.

“All Covid-19 related expenses would have to be borne by SOP with an estimated cost of RM2mil-RM3mil for 2021.

SOP said if the process to recruit labour is approved, this would reduce the labour shortage from 30% to below 20%, ” UOBKH said.

Meanwhile, SOP’s cost of production is expected to be higher in 2021 from the previous year mainly due to harvesting and additional incentives to retain workers, UOBKH said.

“Besides, fertiliser costs have increased significantly due to the rising prices of raw materials.

“Management guided that SOP managed to secure its volume where prices were flat y-o-y in the first half, but the second half’s fertiliser prices should be higher y-o-y, ” it added.

Source: The Star

https://www.thestar.com.my/business/bus ... -oil-palms

[winston]

On track to deliver record profit in FY21E

1Q21 core PATMI was ahead of our/consensus expectations driven by better-than-expected CPO ASP achieved.

Following our PATMI upgrade, we now expect SOP to deliver a record core PATMI for FY21E (+29% YoY), driven by higher CPO ASP of MYR3,100/t.

We maintain our BUY on SOP with a new TP of MYR5.67 as we roll forward our valuation year to 14x FY22 PER peg (previously MYR5.59 on 14x FY21 PER), its 5Y mean.

Trading at 10x PER and EV/ha of MYR30,000, the stock is undervalued.

Source: Kim Eng

https://mkefactsettd.maybank-ke.com/PDFS/221772.pdf