Wednesday, January 09, 2008

Hidden Gem In The Plantation Sector

One of the articles that caught my attention this morning was the one published on Star Business, Chin Teck a hidden gem among plantation stocks

With the plantation sector is sizzling hot, any such article would certainly stir anyone interest. Mine was.


  • Chin Teck Plantations Bhd may be a laggard in the plantation sector but its good earnings growth and very attractive yield make it a hidden gem among plantation stocks.

    A brokerage in a report
    said Chin Teck’s operating efficiency was on par with some of its larger peers and it enjoyed one of the highest profit margins in the sector.

I wonder... who is the brokerage? And when was the report dated? ( Sometimes, I seriously wonder why our business articles cannot quote or name their sources directly. Why?)

  • The research house sees Chin Teck’s earnings per share improving to 77.6 sen for the year ending Aug 31, 2008 (FY08) compared with 44.5 sen in FY07. While the sector has advanced almost 80% year-to-date, Chin Teck’s share price has only appreciated about 38%.

    The company’s shares are trading at 10.7 times FY08 price-to-earnings ratio despite its decent growth, good leverage to crude palm oil (CPO) prices and attractive yield.

    The brokerage said it offered a dividend yield of more than 6%, which was the highest in the sector. The company recently declared an interim dividend of 25 sen for FY08, which will go ex- on Jan 21.

PS. It's trading based at 10.7 times FY 08 earnings. Do understand that this research house is EXPECTING (or ass-u-ming) that Chin Teck earnings grow from 44.5 sen to 77.6 sen. Huge growth in earnings is expected for this FY 08!!

The article then continues..

  • Chin Teck has a strong balance sheet, having net cash and cash equivalents amounting to RM123.1mil in FY07. Based on the current CPO price, it could generate another RM50mil to RM60mil from operating activities in FY08.

    Its landbank, last revalued in 1983, would be worth much more at current prices, especially that in Port Dickson, which could be used for property development. The potential revaluation will enhance the company’s net tangible asset per share.

    As at end-FY07, its investment in securities, which cost RM18.3mil, had a market value of RM33.7mil, translating into a gain of RM15.4mil.

    Its reserves as at FY07 stood at RM368.3mil, which are sufficient for the group to declare a four-for-one bonus issue if it wants to.

    Chin Teck’s fourth largest shareholder, Keck Seng (M) Bhd, is involved in property development, hotel management, plantations and palm oil milling.

    Given their similar businesses in plantation, perhaps a consolidation could create more synergy for their shareholders.

Sounds so good eh?

Surely it warrants some investigation, no?

First thing.. I thought I decided to look at Chin Teck's charts. Here is the 'live' chart from my stock quotes provided by RHB.



Oh my..... Wait a minute, this is a fantastic looking stock and it certainly doesn't look like a laggard stock!

Let's refer back to the opening line in the article...

  • Chin Teck Plantations Bhd may be a laggard in the plantation sector but its good earnings growth and very attractive yield make it a hidden gem among plantation stocks

How?

Now... I seriously wonder... who is the brokerage? And when was the report dated?

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Just for the record.. Chinteck ended the trading day being the top gainer! It closed at 8.80, up a nice 50 sen.

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1 comments:

IjanMaster said...

Moola,
Maybe you should write up the definition of 'LAGGARD' AND 'LEADER'.
Certainly the stock if flying very high...