HORANA PLANTATIONS PLC (HOPL.N0000)

HOPL is a Tea + Rubber planation. Its Public Holding Percentage as at 31st December 2010 was 37.28%. This is a small analysis I've done today for (ok lets say for fun )
However, I must confess that the latter part of this analyisis have been carried out with lot of hypothesis hence this can be taken as nonsense to some..
So in advance, I'm emphasizing that any investment decisions based on this valuation is not to be taken.
My method only suits me...

HOPL Valuation

PAT after removing of other income;

31.12.2010 – 166.31 Mn
30.09.2010 – 32.23 Mn
30.06.2010 – (15.56) Mn (loss)
31.03.2010 – 85.33 Mn

Last 04 quarter earnings = 268.31 Mn
No. of Shares (stated) = 25 Mn (There was one golden share which I dont know the meaning of)
EPS = 10.73

Plantation Sector PE - 24.3;

Due to HOPL's huge exposure to Tea which can be affected from wage hike, uncertainity, etc... lets take Fair Value of sector PE as a 50% discount to normal value which is 12.15, hence if we calcualate taking this as the fair sector PE;

Fair Share Valuation = EPS 10.73 x PER 12.15 = Rs. 130.36/- level.
Current Share Price =  Rs. 70/-

HOPL has hit an all time high close of 90.6 (with a high of 96.1) in February 8th and dragged down to 70s now.

For the analysed period, their Main income source has been Tea. However the contribution from Rubber has seen an increase in Q4 results and even with the adverse waether conditions since Oct-Nov, Tea has done a great deal too.
With the prevailing rates of rubber (being high) we can expect the revenue to be at least remain same levels if not for disturbance from bad weather..
If that happens its safe to assume that even the fair share valuation is again at a discount.

Lets combine the 2010 last 2 qtr results alone and divide by 2, then we get a figure of 99.27 which I'm gonna assume as the next qtr result and if wage hike hits Tea and Rubber prices clashes in Q2, further assuming profits gets declined; I give a 50% discount to this amount and take the figure as 49.64 for q2/2011.
Thereafter I assume this counter increase by 10% and 40% respectively from 49.64 for the last 2 qtrs of 2011. (The 40% value is given since in 2010 same qtr results are the highest.)

(this is just an assumption for the preparation of unseen and not to be taken as a real situation what so ever, as you can see I'm not assuming a loss in any occation. Only a down trend of profits assumed)

Here goes the calc;
Expected next 4 qtr results which derived from the last 2 qtr results of 2010 as explained above;

31.12.2010 – 69.50 Mn
30.09.2010 – 54.60 Mn
30.06.2011 – 49.64 Mn
31.03.2011 – 99.27 Mn

Expected Last 04 quarter earnings will be = 273 Mn (this is again more than the current earnings)
No. of Shares (stated) = 25 Mn
EPS = 10.92

Due to the nature of uncertainity, taking Fair Value of sector PE as a 50% discount to normal value which is 12.15, if we calcualate taking this as the fair sector PE;

Fair Share Valuation = EPS 10.92 x PER 12.15 = Rs. 132.68/- level.
Current Share Price =  Rs. 70/-

Therefore even after arriving at many assumptions, discounts on the valuation, share price is still attractive..
According to tech charts, this is in oversold region but can even go a little bit down as indicated by RSI/ROC indicators;
http://www.bloomberg.com/apps/quote?ticker=HOPL:SL

This is just my view and I let this for your futher analysis and comments pls.. cuz others can have different views on this and may also have mastered these

It will be much appreciated if anyone can help analysing the minimum time period that we have to keep a share for a good gain. i.e. with today's price of 70/-, how long it will take HOPL to rise above 100?

Disclosure : I dont have HOPL in my portfolio yet.

Based on impressive performance in the third quarter Horana Plantations Plc (HOPL) is forecast to end the 2010/11 financial year with a profit after tax of Rs. 387 million. This upgrade in earnings outlook is by John Keells Stock Brokers (JKSB).


Here are excerpts from Quarterly Earnings Highlights by JKSB’s Research.



http://www.ft.lk/2011/02/03/horana-plantations-forecast-to-post-rs-387-m-net-profit-in-fy2011/

I have been posting about the plantation sector being way undervalued (Rubber+palm oil) for a while now and have about 50% of my portfolio filled with them! I also posted few analysis I think about these shares like 1-2 months ago.
IMO all the plantations that are less exposed to tea are trading at less than 1/3 there real value at least. There are still some good plantations like HOPL that have Rs 800 (this value almost same whole year throughout) per KG sole creep rubber plantations even though they have some exposer to tea and we can come to a better understanding after the wage hike but still can clearly see are very undervalued!
Most people have a bad memory with plantation stocks in past years and they let there judgement get clouded from this! Well as I said before they can always jump in when they have gone up by about 100% more and on a run like the poultry sector always as well!

Very sensible analysis. smallville, good to see you posting your analysis rather than fortune telling.

My observation in CSE over the last 2 years is, plantation stocks do not exactly behave as per their fundamentals. RPCs owned by big groups did do well, like WATA (Tatas), KVAL (Hayleys), KGAL (Richard Peiris), KOTA (Lankem).

AGAL, MAL, Horana etc. took a long time to be recognised. For the large part, they stagnate.

Labour issues, weather pattern etc. keep the investors away. On the other hand stocks like BALA do not perform upto expectations as large part of earnings are sucked out by way of management fees.

If you look at MAL, it is excellent in fundamentals. But in nature, illiquid for large part, even after a good enough split annoucement.

So, though by fundamentals Horana can pass Rs. 130 easily, in reality it is a hard task.

Yes, Horana is Performing well and I too agree with the above views. But for me best Co. in the plantation sector at present price level is MAL. Look it's EPS is Rs.18.98 and price is Rs.103/= Then the PE is (103/18.98) 5.42. I beleive MAL is much more attractive than any other stock in the plantation sector.Annoncement was also made for 10 to 1 split.

Ok dont take me wrong, I'm just expressing my view, but I might be right or wrong..

MAL has been a good counter, the share price dropped from previous levels earlier due to not meeting the expected qtr-qtr growth.. though this has not made a loss like BALA.

The recent run we witnessed was due to the sub division which will again drag the share price down (in my opinion) after the sub. I dont know why ppl would go after this as this will again create the RICH effect (we've seen rich goin down to 9 from 13s after their unwanted sub)

Rajitha has talked abt the plantation values, especially Rubber+palm oil which made me do some analysis to come to a conclusion. There's another plantation AGAL which I'm gonna do the next analysis on as I think its also trading at a discount

I'm more bullish on KGAL & NAMU than all plantations, but having said this; since my analysis made me see the reality, I'm gonna change my portfolio from Monday onwards.. ;-)

Should thank Rajitha for his early discussion on these as it inspired me for some further analysis..

Ok now I'm gonna read some research reports from broker firms as well before the investment decision is made.

Great work Smallville.

Horana Plantations PLC is one of Sri Lanka’s premier plantation companies, comprising of sixteen prime estates. Since being incorporated on the 22nd June 1992, following the privatization of plantation estates into the hands of the Regional Plantation Companies (RPC), Horana Plantations has grown into a leading producer of the finest tea, rubber and other agricultural produce in Sri Lanka.

The Company’s sixteen estates are spread over a total area of 7441 hectares (18,603 acres), primarily in the Central and Western provinces of Sri Lanka. 41 % of the cultivated area has been dedicated to tea, 40 % to rubber, 8 % to timber, and 11 % to other diversified agricultural crops. Horana Plantation has an annual production of 4.6 Million Kg of tea and 1.6 Million Kg of rubber.

Horana Planations product range is renowned for its excellent quality and high standards. A significant proportion of the Company’s estates have been internationally certified with quality standards such as HACCP, ISO:22000:2005, SGS Product certification and Forest Stewardship Council’s SGC Certificate.

Horana Plantations PLC is a public quoted limited liability company and its shares are listed on Colombo Stock Exchange bearing the stock symbol HOPL. The Company is a subsidiary of the Ceytea Plantation Management Ltd, with its ultimate parent company being the Ceylon Theatres Group. The Ceylon Theatres Group spans a widespread of interests in Retailing, Food & Beverage, Ceramics, & Tiles, Finance, Stock Broking, Cinema and Property Development.

http://www.horanaplantations.com/Corporate-Profile.html

That's nice. LWL, RCL also will run with that