Disclaimer: This article is in no way financial advice, nor solicitation to buy or sell shares in this company. It is purely for educational purposes only. You are highly recommended to conduct all necessary due diligence and make your own informed decisions before making any financial decisions. The writer already owns shares in this company and may at any point in time increase or reduce their position without prior notice. Do not try to copy trade without understanding the risks!

Hello all, today we will dive deep into a plantation Company X, as a continuation of my previous article, “Is it Time to Invest in Malaysian Plantation Stocks?”. If you haven’t read it yet, we highly recommend you to do so, to get a better understanding of the plantation industry, especially all the industry specific jargon.

Key operational metrics for plantation companies

Towards the end of the last article, I asked, “What do you think are the 5 key operational metrics that will help you better evaluate the performance of plantation companies against each other?”.

(drum roll)

The answers are non-exhaustive:

1. FFB Yield per Hectare

2. Oil Extraction Ratio

3. Age of Palm Trees or Tree Age Profile

4. Total Planted Area vs Total Plantable Area vs Total Estate Area

5. Mill utilization rates

6. Cost of production per MT of CPO or FFB

7. Replanting Rate

8. Labour productivity… and more.

You don’t need to know all the answers when evaluating a company, but the more information you can dig, the better your understanding will be.

It’s even better if you can find out these information and compare it against peers in the sector, and to compare it against results over multiple years, to pick the one with the biggest investment potential. Generally, you can get some, if not most of these details from their respective annual reports.

Case Study

Before I jump into the details of this plantation Company X and reveal its name, I would like to present a few charts showcasing some of their financial numbers. Just at a glance, how much do you think this company is worth? Or how much would you pay for this company?

***

A few highlights from the charts above:

1. Net debt turned into net cash in 2024

Net cash position improved from RM1,000 mil in debt in 2016, to about RM300 mil in net cash currently. This means that this plantation Company X:

• Increased its cash position by RM1,300 mil over the last 10 years; and

• Now has about RM300 mil cash in the balance sheet, after deducting all their debts and borrowings.

2. Increasing free cash flow (FCF)

This plantation Company X generated about RM1,200 mil operating cash flow (OCF) in the past 3 years (2022-6M2025), while spending about RM200mil for capital expenditure in the same period. This means that they:

• Generated RM1,000 mil in free cash flows (FCF), which was mainly used to reduce their borrowings; and

• Generated about RM330+mil of FCF per year, on average.

3. RM220 mil FCF in 6 months of 2025

In the 6 months of 2025 alone, they had already generated about RM220 mil of FCF.

Comparing to other public listed companies on Bursa

So, with this information, let’s compare the financial numbers against other companies within the plantation sector as well as other listed companies in general.

1. United Plantation

United Plantations has net cash of about RM500 mil, while generating about RM500 mil in FCF in FY2024. They paid out roughly RM700 mil in dividends last year, which is more than their profit or cash flows, thus their net cash position has been dropping over the years. They have a net asset value of about RM2.9 billion, with a market cap of RM13.8 bil (Data as of 14 May 2025, numbers are rounded).

2. Sarawak Oil Palms

Sarawak Oil Palms has net cash of about RM1 billion, while generating about RM400 mil of FCF in FY2024. They paid out roughly RM200 mil in dividends last year. They have a net asset value of about RM4.1 billion, with a market cap of RM2.7 billion (Data as of 14 May 2025, numbers are rounded).

3. Innoprise Plantations

Innoprise Plantations has about RM40 mil in net cash, while generating about RM80 mil in FCF. Of which, they paid out about RM75mil in dividends. They have a net assets value of about RM340 mil, with a market cap of RM800 mil (Data as of 14 May 2025, numbers are rounded).

***

How about if we compare the numbers against other popular stocks?

4. Kossan Rubber Industries

Kossan, which arguably has the best financials currently amongst the glovemakers, has a net cash of around RM1.5 billion, OCF of RM124 mil and spent RM300 mil CAPEX, hence its FCF is negative at RM176 mil. Even so, they paid about RM300 mil dividends last year. With a net asset value of RM3.7 billion, Kossan has a market cap of RM4.5 billion (Data as of 14 May 2025, numbers are rounded).

5. Inari Amertron 

Inari, from the semiconductor sector, has a net cash of RM2.2 billion. Of which, about RM1 billion of it was from private placements few years back. They generated about RM330 mil of FCF last year and paid out roughly RM300 mil of it as dividends. (Why issue shares for cash if you’re just going to give the cash back as dividends?). Inari is valued at roughly RM8 billion by market capitalisation (Data as of 14 May 2025, numbers are rounded).

6. Gamuda

Gamuda, from the data center construction sector, is about RM4.5 billion in debt. It generated RM150 mil in OCF, spent RM1,660 mil in CAPEX and paid out about RM460 mil dividends. They have a net asset value of about RM12.1 billion with a market cap of RM27.4 billion (Data as of 14 May 2025, numbers are rounded).

7. 99 Speed Mart

The newly listed 99 Speed Mart is in RM600 mil net cash, while generating RM120 mil FCF in 1 quarter (since they are newly listed, full year data is not available). Net asset value is around RM1.7 billion, with market cap of RM18.4 billion (Data as of 14 May 2025, numbers are rounded).

***

The table below shows the comparison between all the companies stated above (Data as of 14 May 2025, numbers are rounded):

***

How much would you pay for company X, with their financial numbers placed side-by-side with other stocks? What other interesting observations can you make from the numbers provided above?

There is no fixed answer, since it will vary greatly depending on your valuation method.

In my last post, “Is It Time to Invest in Malaysian Plantation Stock?”, I mentioned that most plantation stocks tend to be valued by the market based on their dividend payouts and get rated to bring the yields to about 6-8%? If you use that as one estimation of value, the fair value of Company X could range between RM0.7 bil to RM1.0 bil.

Indeed, the actual market cap of Company X is about RM1.1 bil currently. But if you look closely and look further, you might see something that stands out compared to the other companies in the list.

Subscribe to Community Subscription to read the rest of the article!