Oil Palm

Excerpts from some of Mr Koon Yew Yin posts on kclau.com:

I consider the safest shares to invest are undervalued oil palm shares. The reasons are:-

1. The production cost for CPO is about Rm 1,300 per ton and the average selling price has been more than double the production cost in the last 10 years or more. The average CPO price for 2011 is more than Rm 3,000 per ton. Which business can offer such big profit margins?
2. The demand and profit are sustainable due to population increase. Moreover, both China and India who are our buyers have been improving their economy. The financial problem in Eurozone and US has little or no effect on our palm oil market.
3. A palm tree will start fruiting after 3 years. It will continue to bear more fruits until it is about 16 years old after that age it will begin to bear less fruits. Only after about 22 years a palm tree needs replanting.
4. The land always appreciates in value.
5. There is good profit growth prospect and sustainable profit

If you look at the first quarter results of plantation stocks, you will notice that almost all of them have made more profit than the corresponding quarter of last year. Moreover, you can see that the average selling price of CPO was around Rm 2,600 per ton and average CPO price has been above Rm 3,000 for this year. You can also see in the Star daily that the CPO price for the next few months is above Rm 3,100 per ton. Basing on these information you can safely assume that almost all plantation companies will make more profit this year than last year.

The above was in June/July 2011, and recently the CPO future has been trading at close to RM3,500 level...hmm...better late than never.

 

 

Some of the plantation stocks to lookout for:

• KLK - M'sia
• TWSPLNT - M'sia
• BKAWAN - M'sia
• TDM - M'sia
• IOICORP - M'sia
• Wilmar Int - SP
• Golden Agri - SP
• Mewah Int - SP
• First Resource - SP
• Indofood Agri - SP
• Bumitama Agri - SP (Recently listed on SGX)

Disclaimer: This is not an invitation to buy or sell. I do not guarantee the accuracy or validity of the information above. Do your own due diligence before investing and invest at your own risk.