Thursday, March 18, 2010

Cepatwawasan (RM0.96): The cheapest plantation stock in KLSE?

From: KWF

I have just done a search on Cepatwawasan. The Mah family of Taiping bought a controlling stake of 32% or more than 65m shares, at a price of $1.77 in yr 2005 through their company called MHC Plantation Bhd, another listed company in KLSE. This means that they bought this company share at very high price of $1.77 as compared to its current price of 96cts!! I also found out that MHC has been buying Cepatwawasan shares in the market for quite sometime and has increased its stake to more than 35% now.

Now, let see why Cepatwawasan is undervalued at current price of 99cts while its net asset backing per share is $1.60 currently and why MHC continues to accumulate this share in the market!!

The following is the net profit of Cepatwawasan...
In yr 2005....$15m
In yr 2006... $20m
In yr 2007....$31m
In yr 2008... $40m
In yr 2009... $17m

Total net profit made for 5 yr = $123m and most of the money was used in replanting and building Biogas plant (using their palm oil waste as fuel) to produce electricity for own use as well as selling the rest to Sabah Electricity Board just like what Kim Loong or TSH have been doing. Cepat is building one Biomass plant costing $60m and one Biogas Plant costing $20m now with the help of a European company. Both of the plants will be completed in yr 2011 and return is expected to be 15%, translating into earnings of $12m yearly to the company.

It is a small Sabah oil palm plantation company with 10,000ha of which more than 80%% is matured. In terms of acres (as shown in its website), it has 19,000+ acres matured now as compared to 10,000 acres matured in year 2005 when MHC bought the company in year 2005, an increase of almost 100% in mature land!!

Thus we can see that its production of FFB will increase a lot in this year as well as years to come. Coupled with the high price of CPO now at $2600++/MT and its new Biogas plant, it will definitely show a great improvement in its profit this year.

Its market cap is only $214m as its paid-up capital is only $215m while Kim Loong has 13,000ha of land and has a market cap of more than $600m while its profit is not much higher than Cepatwawasan. In addition, it has a very low net gearing of only 10%. Thus, Cepatwawasan is worth much more than the current price of 96cts.

Recall that Kim Loong (another small Sabah oil palm plantation company,) share price was very undervalued when it was around $1.00++ just 2 or 3 yrs ago before it shot up to more than $3 in a few months time. It has since increased its paid-up capital to more than $300m now and trading at more than $2 currently. Therefore, will Cepatwawasan follow the footsteps of Kim Loong?

Good Luck. Happy Investing..

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1 comment:

  1. TDM is the cheapest I reckon looking at the RM per hectare.