The 9 Key Things You Need To Know About Hap Seng Plantations Holdings Bhd

Hap Seng Plantations Holdings Bhd (Hap Seng Plantations) is presently the plantation arm of Hap Seng Consolidated Bhd. Listed on 16 November 2007, it is one of the largest producers of sustainable palm oil in the state of Sabah, Malaysia worth RM 2.05 billion in market capitalization. In this article, I’ll be covering 9 quick things that you need to know about Hap Seng Plantations before you invest.

#1: Stock Symbol

Ticker Symbol: KLSE: HSPLANT / KLSE: 5138
Market Capitalization: RM 2.05 Billion (24 November 2017)

Share Price: RM 2.56 (24 November 2017)

Industry: Palm Oil

Syariah Compliant: Yes

#2: The Business

Hap Seng Plantations is focused on upstream oil palm plantation activities. Its major assets include:

1. Plantation Estates
   Hap Seng Plantations has 5 plantation estates. They include Jeroco, Tomanggong, Sungai Segama, Ladang Kawa and Kota Marudu. The total planted area measures 40,279 hectares where 32,374 hectares or 90% of its planted area are matured. Over the last 5 years, Hap Seng has produced, on average, 700,000 tonnes of FFB per annum.
2. Palm Oil Mills
   Hap Seng Plantations has 4 palm oil mills with a combined milling capacity of 180 fresh fruit bunches (FFB) per hour. From which, it has achieved oil extraction rate of 21% and mills utilisation of an average of 74% over the last 5 years.
   
   From 2012 to 2016, Hap Seng Plantations has produced 150,000 – 170,000 tonnes of crude palm oil (CPO) and 35,000 – 40,000 tonnes of palm kernel (PK) a year over the last 5 years.

#3: The Financials

Overall, Hap Seng Plantations has recorded RM 400 – 500 million in group revenues over the last 5 years. From which, it has made, on average, RM 117 million in shareholders’ earnings during the period. Hap Seng Plantations has made a 5-year average return on equity (ROE) of 6.01% a year. This means it has made RM 6.01 in earnings from every RM 100 in shareholders’ equity.

Source: Annual Reports of Hap Seng Plantations

#4: Growth Plan

As at 31 December 2016, Hap Seng Plantations has 3,625 hectares and 5,626 hectares of immature and young estates respectively. These estates would be contributing more FFB to Hap Seng Plantations progressively as these trees continue to grow and mature in the immediate future.

#5: Risks

Invariably, Hap Seng Plantations is subjected to risks associated with the palm oil industry. They include:

1. Palm Oil Prices
   This is subjected to a combination of factors which are interrelated such as weather, crude oil prices, soybean oil prices, global palm oil production, consumption and inventory levels respectively. Over the last 5 years, the financial performance of Hap Seng Plantations was directly impacted by the movements of palm oil prices. This is quite evident as Hap Seng Plantations had recorded higher revenues and shareholders’ earnings in 2012 and 2016 when prices of crude palm oil (CPO) were higher than price levels between 2013 to 2015.
2. Labour Shortages
   The palm oil industry is highly labour intensive. Presently, there is a shortage of workers, particularly skilled harvesters in the local palm oil industry. Hap Seng Plantations would be affected negatively by prolonged shortages in skilled workers as it causes disruption in its plantation activities. The company may incur higher labour costs to hire workers, which in turn, would result in higher operating costs to the company.

#6: Valuation

As I write, Hap Seng Plantations is trading at RM 2.56 a share. In 2016, the company has recorded RM 0.155 in earnings per share (EPS). Thus, its P/E Ratio works out to be 16.52.

As at 30 September 2017, Hap Seng Plantations has recorded RM 2.53 in net assets a share. Therefore, at the current price of RM 2.56, its P/B Ratio works out to be 1.01. It is the lowest P/B Ratio recorded by the company since the year 2010 when its P/B Ratio was 1.52.

#7: Dividend Policy

Hap Seng Plantations has adopted a dividend policy of distributing up to 60% of its earnings to its shareholders in the form of dividends. In 2016, Hap Seng Plantations has declared and paid out RM 0.11 in dividends per share (DPS). Thus, if Hap Seng Plantations is able to maintain its DPS at RM 0.11 in 2017, its expected dividend yield is 4.30%.

So, how do we assess whether Hap Seng Plantations has the capability to pay out RM 0.11 in DPS in 2017? Here, I’ll provide a snapshot of the company’s recent financial results. You’ll make the judgement.

1. Dividends 2017
   Currently, Hap Seng Plantations has declared and paid out its first interim dividend of RM 0.05 a share.
2. Profits 2017
   To-date, 9 months into the financial year 2017, Hap Seng Plantations has reported RM 391.2 million and RM 88.9 million in sales and earnings respectively, up by 4% and 12% from the 9-month figures in the financial year 2016.
3. Balance Sheet Strength
   As at 30 September 2017, Hap Seng Plantations has reported having RM 20.4 million in cash balance, RM 100.0 million in money market deposits, the current ratio of 3.58, and no long-term debt.  

#8: Investors Relation

For further enquiries or to request for additional investment information on Hap Seng Plantations Holdings Bhd’s Investors Relation matters, you may contact:
Andrew Kuan
Designation: General Manager, Corporate Planning & Investors Relation

Telephone:
(603) 2172 5228

Email:
inquiry@hapseng.com.my

Website: https://www.hapsengplantations.com.my/request-for-ir-information.php

#9: Major Shareholders

As at 31 March 2017, the substantial shareholders of Hap Seng Plantations Holdings Bhd are:

– Hap Seng Consolidated Bhd: 53.04%

– Innoprise Corporation Sdn Bhd: 15.00%

– Employees Provident Fund Board: 8.71%

– Lembaga Tabung Haji: 6.34%

– Amanah Saham Wawasan 2020: 0.93%

Note:
Tan Sri Datuk Seri Panglima Lau Cho Kun is a substantial shareholder through his interests in Gek Pek (Holdings) Sdn Bhd which has substantial interests in Hap Seng Consolidated Bhd. Presently, none of the members of the board of directors is substantial shareholders of Hap Seng Plantations Holdings Bhd.

Want to know more about Value Investing In Asia? We have just launched our book “Value Investing In Asia; The Definitive Guide To Investing In Asia”, published by J.Wiley. Find out more about the book here.

There is no ads to display, Please add some