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Background: Global Palm Resources (GPR) is a relatively small plantation company with a total landbank of just over 16,000ha in Kalimantan. Of this, 12,434ha are planted area with 10,301ha in mature stage with an average age of 12.7 years. GPR was listed on the Singapore Exchange in April last year, raising $50m in its IPO.
Recent development: The company’s reporting for 1Q11 last month indicated a 34% rise in revenue, which was mainly driven by higher crude palm oil (CPO) prices. Correspondingly, net profit also grew by 34%. However, sales volume grew by a more muted 4%. With its pure plantation profile, GPR will be a beneficiary of higher CPO prices. However, the pace of new plantings has been disappointing, with just 205ha planted in 1Q11, despite having earmarked its IPO cash for new plantings.
Key ratios…
Price-to-earnings: 14.1x
Price-to-NTA: 1.0x
Dividend per share / yield: 0.16 cts / na
Net debt per share: net cash
Net debt as % of market cap: na
Share price S$0.29
Issued shares (m) 413.0
Market cap (S$m) 119.8
Free float (%) 27%
Recent fundraising IPO – April 2010
Financial YE 31 December
Major shareholders Management – 72%
YTD change -18.3%
52-wk price range S$0.275-0.41
Our view:
Near a plateau. With 82% of its plantations at peak production stage, GPR will be able to raise FFB production with minimal increases in production costs and capital expenditure. But this limits its production upside in the medium to long term. The company is on the lookout for existing plantations and to increase uncultivated landbank. However, current high prices for plantation land are prohibitive, in our opinion.
Building up asset base. Given its relatively small size and growing demand for CPO, GPR itself may be a target for acquisition. With a P/B of just 1x, a buyer may be willing to pay upwards of 1.2x, if it sees the potential to raise yields and profitability further.
Fairly priced. Compared with its peers, GPR appears to be fairly priced on an earnings basis, despite recording the worst price performance YTD (see table). However, it has net cash of $28m.
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