KUCHING: Soaring palm oil prices in recent weeks have driven up the share prices of Sarawak-based plantation companies to their highest levels in about two years.
The benchmark palm oil contract for March 2020 delivery on the Bursa Malaysia Derivatives Exchange hit the RM3, 000 per tonne mark and jumped RM22 to RM3,027 per tonne on Friday (Dec 27).
The rally has taken the prices to new two-year highs as lower production data fuels fears of a supply shortage, according to latest media reports.
Crude palm oil (CPO) futures started the climb in mid-October at around RM2,214 per tonne and continue to rally. This, according to some analysts, could have been driven by panic buying due to concerns of a potential palm oil supply shortfall.
Riding on the bullish CPO prices, Sarawak Oil Palms Bhd (SOP), Ta Ann Holdings Bhd, Sarawak Plantation Bhd, Rimbunan Sawit Bhd, Jaya Tiasa Holdings Bhd and Subur Tiasa Holdings Bhd, have seen their share prices trending higher on expanded daily trading volumes.
Miri-based SOP surged 28 sen to close at RM4.02 on Friday, the highest level since December 2017. Week-on-week, the stock gained a handsome 40 sen or 11 percent. SOP was hovering around RM2.05 before the run-up in early October.
As at end-2018, SOP group has a total planted oil palm area of about 88,386 hectares, of which 40,757 hectares are in prime production (11-20 years) while 38,288 hectares are aged 4-10 years.
The group is also involved in palm oil refinery and other downstream processing of palm oil-related products. In 2018, SOP produced 419,356 tonnes of CPO and some 1.34 million tonnes of fresh fruit bunch (FFB) from its own estates.
In the first nine months ended September 30, 2019, SOP posted group revenue of RM2.05 billion and net profit of RM41.1 million, which were lower against RM2.55 billion and RM60.4 million respectively in the January-September 2018 period.
Ta Ann, which diversified progressively into oil palm plantation in 2000 from its traditional logging and downstream timber processing business, is a major beneficiary of the rise in palm oil prices.
The Sibu-based company added 24 sen or 7.4 percent to RM3.49 on Friday compared to a week ago from its 52-week low of RM2.00.
Ta Ann group owns 13 oil palm estates across Sarawak with total planted area of over 47,000 hectares as at Dec 31, 2018. It also operates two palm oil mills with annual processing capacity of 1.3 million tonnes of FFB.
In the first nine months of FY2019, Ta Ann recorded group net profit of RM47.46 million on turnover of RM662.85 million, down from RM59.76 million and RM728.3 million respectively in the corresponding period of 2018.
Sarawak Plantation, an associate of Ta Ann, chalked up a weekly gain of eight sen to close at RM2.04 on Friday against 52-week low of RM1.31.
The group has 20 oil palm estates with total planted area of 35,893 hectares, representing about 78 percent of its total landbank of 46,248 hectares.
Ta Ann acquired a 30.39 percent stake for RM169.9 million and became Sarawak Plantation’s largest single shareholder about two years ago.
Palm oil now Jaya Tiasa’s main revenue earner
Jaya Tiasa, which has seen a strong recovery of its share price, rose to intra-week high of RM1.01, the highest level in 21 months. Due to its dismal financial results, the stock was battered to 52-week low of 44 sen in September.
The group has 69,589 hectares of oil palm plantations spread over 10 estates in Sarawak as at June 30, 2019. The group owns four CPO mills which are able to process 1.728 million tons per annum of FFB.
Also a traditional timberbased company, Jaya Tiasa’s main revenue, however, is now derived from oil palm business. In FY2018, the oil palm segment contributed RM457.3 million or more than 70 percent to group revenue of RM637.7 million. The timber business, which included logging and manufacturing of timber products, chipped in with revenue of about RM180 million.
In FY2018, the oil palm segment incurred pre-tax loss of RM132 million (FY2018: loss of RM26.1 million) due to a 23 percent and 36 percent drop in CPO and palm kernel selling prices respectively compared to FY2018. Group pre-tax loss widened to RM191 million from RM79.7 million year-on-year.
However, in first quarter ended Sept 30, 2019, Jaya Tiasa has bounced back strongly, registering group net profit of about RM16.2 million on expanded revenue of RM232.5 million from RM848,000 and RM211 million respectively in Q1-2018.
Rimbunan Sawit, like Jaya Tiasa, is under the stable of the diversified Rimbunan Hijau (RH) Group.
Rimbunan Sawit has seen a strong rebound of its share price from year’s low of 12 sen to close at 39.5 sen on Friday for a weekly gain of 6.5 sen. Trading of the stock has been volatile.
Investors have dumped Rimbunan Sawit shares after it incurred massive losses in recent years. In financial year ended Sept 30, 2019 (FY2019), the group posted net loss of RM37.9 million which, however, was an improvement from loss of RM51 million in FY2018. Group revenue shrank to RM198.2 million from RM245.2 million year-on-year.
Subur Tiasa Holdings Bhd, the third listed entity of the RH Group, sold 2.3 million shares of Rimbunan Sawit on Dec 24 and 26. Rimbunan Sawit vice chairman Tiong Kiong King has recently completed the disposal of his entire direct shareholding of about 11 million shares (as of April 1, 2019) in the company. Executive chairman Tan Sri Tiong Hiew King has reduced his indirect shareholding in the plantation company to about 777.67 million units (54.824 percent) from 820.7 million shares (57.86 percent as at April 1, 2019).
Rimbunan Sawit has 17 oil palm estates spanning across Kuching, Sibu and Miri regions. Total planted area stood at 48,765 hectares or 63 percent of its landbank. About half of the palm trees are prime mature.
Subur Tiasa, which is involved in both timber and plantation businesses, has also benefitted from the palm oil price rally. The stock rose to intra-week high of 88 sen and closed at 86 sen on Friday, having recovered from 52-week low of 38 sen, in light volume.
