HSPLANT

HSPLANT OVERVIEW


Hap Seng Plantations Holdings Berhad is a Malaysia-based investment holding company, which carries out marketing and trading activities for its subsidiaries. The company is engaged in cultivation of oil palm and processing of FFB carried out in Malaysia. As of December 31, 2010, the compayny covers plantation estates of 39,803 hectares are situated at three geographical areas. The first is a contiguous plot of land measuring approximately 36,354 hectares is situated between Lahad Datu and Sandakan; the second area, measuring approximately, 1,276 hectares, namely Ladang Kawa Estate is in Tawau and the third area, measuring approximately 2,173 hectares, is at kampung Natu, Kota Marudu. During the year ended December 31, 2010, the company produced 677,071 tons of FFB; 149,941 tons of palm oil and 33,409 tons palm kernal. The company is projected to produced more in the near future as demand from China and India still remain strong.

Fundatmental analysis
MARKET CAP = 2320.00MIL
SHARE OUTSTANDING= 800 MIL

ROE = 15% 

ROI   = 13%

5 YEAR EPS GROWTH RATE = 50%

AVERAGE PE = 10

QUICK RATIO  = 2
CURRENT EV/EBITDA = 9.00
PREDICT EV/EBITDA (BASE ON 3.30 PER SHARE) = 9.30
P/BOOK VALUE = 1.20

DEBT TO EQUITY RATIO = 31.25%

DIVIDEND YIELD = 6%

CASH PER SHARE = 0.15SEN

CURRENT EPS 3RD QUARTER = 24 SEN

Future share price value

With current CPO remain 3000 and above, and production of Hsplant remain stable and above average, predicting their next quarter eps will be around 8 sen. 

Future EPS for whole quarter = 0.24 +0.08 = 0.32

Average pe = 10

Future value = 3.20 (For 2012)

Intrinsic value for 5 years

Assuming that 5 years eps growth rate is around 50%.

EPS for the 5th year = 0.48 sen

Assuming average pe increase to 12 (as number of share holder increases) 

Forecase share price = 5.76

Assuming discounted value of 4.8% base on beta of 1.16 = 0.822

Hsplant intrinsic value = 4.70 (4 to 5 years time)


Comment:
Base on the 1h2012, i still remain positive of CPO at above 3000. The trend for 2012 will be looking for much profitable and growth prospect plantation company. The downside risk is that if CPO were to drop below 2800, this will affect most of the plantation company. However, Hsplant cash and equivalent are increasing tremendously from the previous year. This cash might be use to pay out to investor as dividend or shares buy back. Thus, i remain a strong buy call for Hsplant as their management and growth prospect in the next few years will be splendid. Overall, their balance sheet remain healthy, without any debt and as the world economy remain in a turmoil and ambiguous state, this share remain a defensive share and more of a long term escalating growth prospect.  

Technical view:
200 MA cut 50 MA. I would recommend investors to start accumulating now as it is the right timing to buy. In the short term, i foresee that the share price may consolidate at a range of 2.85 to 2.95 but in the mid to longer term, the share price may skyrocket to its intrinsic value. The volume has shows that there have been some accumulate at 2.80 to 2.85. Investors are still holding for longer term. I would strongly advice investors to accumulate at 2.80 to 2.90. For your info, please buy at your own risk. Just a two cent of advice. Happy investing!!!