Maybank IB initiates coverage on Boustead Plantations with 'buy' call, RM2.16 TP

by **Cals** Thu 07 Aug 2014, 00:52

Business & Markets 2014

Written by Ahmad Naqib Idris Adzman Shah of theedgemalaysia.com

Wednesday, 06 August 2014 11:01

KUALA LUMPUR (Aug 6): Maybank Investment Bank Bhd (Maybank IB) has initiated coverage on Boustead Plantations Bhd with a “buy” call and target price (TP) of RM2.16.

In a note today, Maybank IB estimated a net profit compounded annual growth rate (CAGR) of 32%, for the upstream plantation company from 2013 to 2016.

According to Maybank IB, Boustead Plantations' growth will be underpinned by higher crude palm oil (CPO) average selling prices (ASP), higher fresh fruit bunches (FFB) production and lower interest expenses.

Maybank IB said the estimated CAGR over the four years did not include new acquisitions or estate divestments.

According to Maybank IB, Boustead Plantations has identified eight estates with the potential for property development in the coming years, measuring approximately 11,414ha.

“While BPLANT (Boustead Plantations) has no intention of venturing into property development, we believe it has no qualms in selling its estates to unlock value.

“For instance, BPLANT sold 379 acres of its Balau Estate in Semenyih in 2013 for MYR107.3m or MYR6.50psf (or ~MYR700,000 per ha), and posted a disposal gain of MYR92.8m,” said Maybank IB.

Besides that, Maybank IB said that another key attraction of the group is its 19,202ha of freehold land in Peninsular Malaysia. The tract accounts for about 23% of Boustead Plantations' total landbank in the country.

Out of the total 19,202ha, an 89% portion is located along the west coast.

“Unlike most plantation peers in the region and in Malaysia, BPLANT has a unique selling point - strategic land bank with property development potential given its long operating history.

“To value BPLANT based solely on its upstream plantation will undermine its intrinsic value,” said the research house. By our estimate, the estates with property development potential have a combined value of MYR2.96b, which is even larger than its current market cap of ~MYR2.5b,” said Maybank IB.