IPO PRICE 30.5 CTS , NOW ???????????
El Nino poses big threat to palm oil production
http://mpoc.org.my/El_Nino_poses_big_threat_to_palm_oil_production.aspx
On prices, Ling said history had shown that El Nino was usually followed by a 15% to 125% spike due to the major disruption in supply.
In 2009 and 2010, following the El Nino, monthly prices increased by 80% and by 110% in 1997 and 1998.
1. Though production volume may drop a few %, this would be more than compensated by the possible ~30% to 100% spike in CPO, based on historical data.
2. Indonesia' s biodiesel blending mandate is set to increase from current 15% to 20% by Jan 2016 or 33% increase.
3. Kencana is at least 4.6 times undervalued relative to First Resource (see Table below)
4. Morph Investment is in the Top 20 and has upped its stake in Kencana last year.
Who is Morph Investment? It has a very impressive track record in value investment. Many of its invested counters have been privatized!!!
|
Market Cap (mil) |
Size of planted plantations (Ha) |
Unplanted areas |
Land Bank |
Market cap ($) per Ha of planted area |
|
|
Bumitama |
1,700 |
153,268 |
45,732 |
199,000 |
11,092 |
|
Kencana |
215 |
66,666 |
126,904 |
193,570 |
3,225 |
|
First Resource |
2,900 |
194,567 |
~0 |
~0 |
14,904 |
The last column would show that Kencana is about 3.4 times " undervalued" compared to Bumitama, which itself is about 34% " undervalued" compared to First Resources.
Comparing with First Resource, Kencana is 4.6 times " undervalued" !!!
The crude palm oil (CPO) price is expected to be supported by the declaration of the EI Nino weather phenomenon, while the finalisation of new regulations in Indonesia will expedite the implementation of biodiesel.
El Nino events have historically resulted in dry weather in oil-palm growing regions and the resultant low production usually boosts CPO prices.
We believe El Nino, along with the strong commitment and execution of the biodiesel mandate by the Indonesian government, could be a positive catalyst for CPO prices. However, the development of both events still needs to be observed as both disappointed the market last year.
The new regulations signed by Indonesian President Joko Widodo to implement an export tax levy on CPO exports could help support CPO prices.
The bulk of the export levy collection will be channelled towards subsidising biodiesel, which would incentivise biodiesel production. This, in turn, will likely lead to the take-up of a large portion of Indonesia' s CPO production for biodiesel production. This will alleviate concerns over high inventories by channelling supply to the domestic biodiesel market.
{The Straits Times (Singapore), May 23, 2015 Saturday, Brokers' call}
