DEPOK (eNBe Indonesia) - Like other plantation firms listed on the Indonesia Stock Exchange (IDX), London Sumatra Plantations (LSIP), controlled by Salim Group, is valued way below equity and traded with PE multiple 7 only.
It is true that crude palm oil (CPO) has fallen significantly from peak, but the current price can still generate profit for plantation firms. LSIP booked net profit of Rp1.03 trillion in 2022, grew 4.4% year on year (y/y), mainly supported by finance income.
Revenues increased 1.3% y/y to Rp4.58 trillion, higher primarily due to higher average selling prices (ASP) of palm products which was partly offset by lower CPO sales volume.
But cost of goods sold also rose 14% y/y to Rp3.1 trillion, then gross profit fell 17.7% y/y to Rp1.49 trillion.
LSIP said its profit margin grew to 23% from 22%, while core profit declined 13% to Rp1.1 trillion. Ebitda fell 10% to Rp1.75 trillion, and Ebitda margin weakened to 38% from 43%.
On sales, LSIP sold 286,000 metric tons (MT) of crude palm oil (CPO) during 2022, declined 10% y/y. Sales of palm kernel rose 9% to 100,000 MT.
CPO production was flat at 306,000 tons, while FFB nucleus production increased 2% to 1.4 million tons mainly. In the second half (H2) of 2022, FFB nucleus and CPO production were up 14% and 27%, respectively.
In addition, LSIP said it maintained its healthy financial position with total asset Rp12.4 trillion including cash and cash equivalents of Rp3.8 trillion with no bank loan as of December 31, 2022.
How about Salim Ivomas Plantations (SIMP), parent of LSIP?
Well, SIMP currently has market capitalization of Rp6.7 trillion, not even one-third of the company’s equity (Rp21.17 trillion). SIMP is also traded with PE multiple less than six, lower than LSIP.
SIMP Group booked net profit of Rp1.5 trillion in 2022, grew 13% y/y, helped by higher finance income, lower finance costs, and lower income tax expenses.
While sales declined 9% y/y to Rp17.79 trillion, mainly due to lower sales of edible oils & fats products which was partly offset by higher average selling prices and sales volume of palm products.
SIMP’s cost of goods sold fell 9.6% y/y to Rp13.1 trillion. And gross profit declined 9.7% y/y to Rp4.65 trillion. Operating profit was flat at Rp2.92 trillion.
SIMP said its operating profit margin improved to 16% from 15%, core profit grew 14% to Rp2.06 trillion. Ebitda also increased 5% to 4.68 trillion, and Ebitda margin improved to 26% from 23%.
In 2022, SIMP Group recorded a strong FFB nucleus production recovery in H2 of 2022 of 10% y/y, leading to 2022 growth of 2% y/y to 2.81 million tons.
This, coupled with higher purchases of FFB from external parties, CPO production grew strongly by 20% y/y in H2 and 7% y/y for 2022 to 736,000 tons.
Going forward? Both LSIP and SIMP said they are still challenged by weather impacts. Both companies remain focused on prioritizing capital expenditures mainly on oil palm replanting program and infrastructure, improving cost control and efficiency.
Meanwhile Tradingeconomics.com reported on Wednesday (March 1) that Malaysian palm oil futures were trading around the MYR4,200 per ton mark, closing in on their highest level since November 2022, buoyed by brisk export demand, a weaker ringgit, and supply concerns.
Exports of Malaysian palm oil products for Feb. 1-25 rose between 15.3% and 25.4% from the same period in January, cargo surveyors showed.
On top of that, the Malaysian Meteorological Department warned of danger-level continuous rain across western regions, raising flooding risks and sparking concerns about disrupted supplies.
Supporting prices further, key markets India and China may need to refill their inventories of edible oil in the coming months. At the same time, any unfavorable weather conditions in India could ignite worries about the country’s domestic production.***