Friday, November 09, 2007
More Upside For IJM Plantations?
Even at RM3.50, there should be more upside for the stock. Those who followed at RM3.00 will do well to hold till then or near that level. Just to recap the reasons for the rerating:
a) the company did not sell forward the bulk of their current production, unlike many companies
b) Hap Seng Plantations listing on November 16 should see the share trade at RM3.40-3.50, and all things being equal, IJM Plantations should trade at a premium to Hap Seng Plantations (please re-read previous post on both companies)
c) the expansion into Kalimantan is proceeding better than expected
d) a narrowing of discount from over 30% to maybe 20% as IJM Plantations is getting bigger and better managed (better yields comparatively to the average in the industry)
e) expansion plans aggressive and well managed, has acquired 3 parcels in East Kalimantan (11,000ha, 10,200ha and 11,000ha)
f) the managed landbank expansion puts IJM plantations from being a smallish player to mid-size and well on the way to narrowing the gap to the big boys - the planned expansion will see a CAGR of at least 6% over the next 5 years
g) hence, just like Petrochina-A listing, good to hold till Hap Seng Plantations listing as IJM Plantations is superior in almost every way even though both trade on the same EPS for 2007 and 2008
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