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Plantation firms to ride on strong commodity prices

+3
Antonym
smallville
shan
7 posters

Go down  Message [Page 1 of 1]

shan


Senior Manager - Equity Analytics
Senior Manager - Equity Analytics

Plantations firms are likely to ride on strong commodity prices experienced in the first quarter of this year, according to John Keells Stock Brokers (JKSB).
It said that commodity prices at Sri Lankan auctions remained strong during 1QCY11 despite disturbances at global level with crisis in Libya and Japan.
In a sector update, JKSB said tea prices have remained robust whilst rubber after suffering a beating in March had shown signs of recovery. Here are excerpts from JKSB’s Update on the Plantation Sector:
All three elevations of tea recorded gains in Year to Date (YTD) prices with National Sales Averages (NSAs) having reached Rs. 394 per kg compared to Rs. 383 per kg during the comparative period in 2010.
Tea prices have been greatly supported by a reduction in output on the back of adverse weather with the latest statistics indicating a deficit of 9.3 million kgs up to February 2011. Production from the medium grown segment saw the highest decline of 26% while the low grown segment posted a deficit of 5 million kgs up to February 2011.
Tea production in Kenya too saw a decline of 9.8 million kgs up to February 2011, a decline of 13.5% along with India which showed a deficit of 6.2 million kgs in the month of January 2011.
In terms of rubber, RSS1 averaged Rs. 591 per kg during 1QCY11, 71% higher over the comparative period in 2010 while Latex crepe 1X averaged Rs. 623 per kg 79% higher than those recorded in 1QCY10. Rubber prices took a beating in the month of March 2011 consequent to the earthquake and tsunami that hit Japan with concerns arising due to closure of manufacturing plants; prices have subsequently recovered.
Commodity prices have been benefited by the increase in price of crude oil on the back of crisis in Libya. Rising crude oil prices has made synthetic rubber more expensive, thereby indicating a possible increase in demand for natural rubber (NR). Further, China – the largest consumer of NR has remained on the sidelines due to soaring rubber prices but is likely to return to the market soon due to a decline in NR inventories.
On the supply side, floods in Thailand, the world’s largest NR producer have disrupted output with production expected to drop by 50,000 tonnes according to the Thai Rubber Association. Seasonal wintering is also likely to dampen supply in the coming months which should further support prices.
Quarterly performance of plantation companies
Strong commodity prices during the 4QFY10/3QFY11 saw the plantations segment posting a cumulative profit of Rs. 1,567 million, a growth of 95% over the comparative quarter in 2009.
Kotagala Plantations Plc (KOTA) and Kegalle Plantations Plc (KGAL) were the largest contributors to the segment’s earnings posting Rs. 239 million and Rs. 227 million respectively, thanks to a sharp increase in rubber prices despite a fall in production due to adverse weather conditions.
Earnings in most companies were supported by rising turnover and a decline in cost of production consequent to reduction in output as well as normalised cost of sales which excludes the one off adjustment that was seen in the comparative quarter in 2009 due to the previous wage hike.
Companies such as Horana Plantations Plc (HOPL), Malwatte Valley Plantations Plc, Namunukula Plantations Plc (NAMU), KGAL and KOTA with significant exposure to rubber were the largest beneficiaries of soaring rubber prices.
http://www.ft.lk/2011/04/13/plantation-firms-to-ride-on-strong-commodity-prices/

smallville

smallville
Associate Director - Equity Analytics
Associate Director - Equity Analytics

As @ 12-04-11, PLT sector PE = 16.60
If we take the current prices, there current EPS values are;
HOPL - 72.30/16.60 = 4.35
NAMU - 115.6/16.60 = 6.964
KGAL - 210/16.60 = 12.65
KOTA - 170/16.60 = 10.24
MAL - 9.9*10/16.60 = 5.96

All these are going at a discount to calculated EPS, with earnings taken into account, I'd say HOPL, NAMU & KGAL have the best potential for a upward movement with the latest qtr earnings..

Though not listed one other huge contributor in Oil+Palm sector is AGAL which is going to be come up with better earnings due to the Oil Palm price increase, second to NAMU..

I've redone my analysis as per the PE as @ 12-04-11
Plantation firms to ride on strong commodity prices Planta10



Last edited by smallville on Fri Apr 15, 2011 8:14 pm; edited 1 time in total (Reason for editing : Amended some wordings for elaberative easeness)

Antonym

Antonym
Vice President - Equity Analytics
Vice President - Equity Analytics

@smallville: I don't predict share prices because they are so uncertain. I predict that you Reputation will exceed 100 today - because your inputs are consistently good.

Keep up the great work!

smallville

smallville
Associate Director - Equity Analytics
Associate Director - Equity Analytics

Antonym wrote:@smallville: I don't predict share prices because they are so uncertain. I predict that you Reputation will exceed 100 today - because your inputs are consistently good.

Keep up the great work!

Thanks Antonym.. I respect ur attitude..
I dont wanna predict either rather I believe we should highlight the value of shares whenever we could for everyones sake..Also this is to highlight the safe levels to enter on earnings fundamental basis..

Mine is heavily discounted Wink, 30-50% sector means its a dip i'm talking abt.. so one can assume this is most probably the best levels they can go for.. Also this depicts the levels they can enter safely..

Plantations can be cyclical and are uncertain too as u say.. so its up to the members to go for investment decisions based on the posts here.. SO Guys be aware.. Very Happy

He heee.. my rep.. well I dont mind its + or - as long as someone benefits from my work.. he hee. I was once a amateur too and had to depend on others Evil or Very Mad which made me do my own work..
We're really gifted that we have so many seniors here to add their thoughts as well..

seyon


Assistant Vice President - Equity Analytics
Assistant Vice President - Equity Analytics

smallville wrote:
Antonym wrote:@smallville: I don't predict share prices because they are so uncertain. I predict that you Reputation will exceed 100 today - because your inputs are consistently good.

Keep up the great work!

Thanks Antonym.. I respect ur attitude..
I dont wanna predict either rather I believe we should highlight the value of shares whenever we could for everyones sake..Also this is to highlight the safe levels to enter on earnings fundamental basis..

Mine is heavily discounted Wink, 30-50% sector means its a dip i'm talking abt.. so one can assume this is most probably the best levels they can go for.. Also this depicts the levels they can enter safely..

Plantations can be cyclical and are uncertain too as u say.. so its up to the members to go for investment decisions based on the posts here.. SO Guys be aware.. Very Happy

He heee.. my rep.. well I dont mind its + or - as long as someone benefits from my work.. he hee. I was once a amateur too and had to depend on others Evil or Very Mad which made me do my own work..
We're really gifted that we have so many seniors here to add their thoughts as well..

Hi Smallville

Good input for the plantation sector.. Thanks... after your signal on KGAL i bought @ 190.. Yes its good counter.. even if value 30% or 50% discount...

Can u just elaborate us cyclical or seasonal impact on plantation sectors.. tell us which quarters would benefit more from seasonal impact...

Thanks in advance

smallville

smallville
Associate Director - Equity Analytics
Associate Director - Equity Analytics

By cyclical I mean that plantations can have few good qtrs followed by few bad qtrs.. Those will mainly depend on the environmental factors such as Rains, summer..
Last Nov-Dec we have seen some heavy rains but plantations with rubber have sustained.. Even in Jan-Feb we've seen the same but hopefully they should sustain as well..

The more positive factor for plantations is rubber+other crops.. and if they have Oil Palm that's best as the prices have been high for sometime.
When I do analysis, I remove plantations with Higher Tea attribute due to its being affected on the April wage hike and uncertain of crops on Rain..So BALA, MAL have not been analysed. Though MAL has some Rubber too..

KGAL & KOTA are the biggest rubber producers while NAMU, AGAL are the leaders in Oil Palm..

factFINDER

factFINDER
Manager - Equity Analytics
Manager - Equity Analytics

smallville wrote:As @ 12-04-11, PLT sector PE = 16.60 If we take the current prices, there current EPS values are;

HOPL - 72.30/16.60 = 4.35
NAMU - 115.6/16.60 = 6.964
KGAL - 210/16.60 = 12.65
KOTA - 170/16.60 = 10.24
MAL - 9.9*10/16.60 = 5.96


All these are going at a discount to calculated EPS, with earnings taken into account, I'd say HOPL, NAMU & KGAL have the best potential for a upward movement with the latest qtr earnings..

Plantation firms to ride on strong commodity prices Planta10


@smallville - excellent work Very Happy , I always impressed by your analysis and even comments !! Very Happy

I prefer if you could further elaborate the above calculation i.e. Price /Sector PE. Can you explain little bit more Question why you need to that and how we should interprete the results (i.e. 4.35, 6.96, 12.65, 10.24 and 5.96) ??

Looking forward to see more and more analysis form you, for the benifit of us Very Happy Very Happy

Good Luck!

smallville

smallville
Associate Director - Equity Analytics
Associate Director - Equity Analytics

Kapilaweer wrote:
smallville wrote:As @ 12-04-11, PLT sector PE = 16.60 If we take the current prices, there current EPS values are;

HOPL - 72.30/16.60 = 4.35
NAMU - 115.6/16.60 = 6.964
KGAL - 210/16.60 = 12.65
KOTA - 170/16.60 = 10.24
MAL - 9.9*10/16.60 = 5.96




I prefer if you could further elaborate the above calculation i.e. Price /Sector PE. Can you explain little bit more Question why you need to that and how we should interprete the results (i.e. 4.35, 6.96, 12.65, 10.24 and 5.96) ??

Good Luck!

Well lets get one ticker, NAMU - 115.6/16.60 = 6.964

Now on the above; 115.6 = last traded price, 16.60 = PLT sector PE as @ 12-04-11.
Hence if you divide, u get the current EPS its going at..
Rather the best approach wud've been dividing the current share price from the calculated EPS (in my pic) so we get the trading PE for the counter, which is much more easy to elaborate and to identify the undervalue counters comparing with sector PE..

Sorry for not making a note on that..Wink Hope things are clear now.. Also I've amended all posts..

factFINDER

factFINDER
Manager - Equity Analytics
Manager - Equity Analytics

@smallville Very Happy Very Happy

mark

mark
Expert
Expert

wow.wow.wow..............impressed,because you were my GURU............
salute my sir....................rep......rep.........rep.............

flower flower flower flower flower flower flower flower flower flower flower flower flower flower flower flower flower flower

Very Happy Very Happy Very Happy Very Happy Very Happy Very Happy Very Happy Very Happy Very Happy Very Happy Very Happy Very Happy Very Happy Very Happy Very Happy Very Happy Very Happy Very Happy Very Happy Very Happy Very Happy Very Happy Very Happy

milanka

milanka
Vice President - Equity Analytics
Vice President - Equity Analytics

http://srilankastockpicks.blogspot.com/2011/04/plantation-firms-to-ride-on-strong.html




Last edited by smallville on Sun Apr 17, 2011 9:31 am; edited 1 time in total (Reason for editing : already discussed..)

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