BLD Plantation vs. Kwantas Corporation

The author published the analysis report here is for his own reference only. It is not an indication of the author's business interests for companies being analyzed. It is definitely not an investment advice, please see the full disclaimer located at the bottom of the blog post.

BLD Plantation Berhad's (hereafter called "BLDPLNT") principal activities including operation of a palm oil refinery and kernel crushing plant, cultivation of oil palm, processing of fresh fruit bunches and sales of related products. Kwantas Corporation Berhad's (hereafter called "KWANTAS") principal activities including operation of oil palm plantations, palm oil mills, kernel crushing plant, palm oil refinery plant, shortening plants, oleochemical plants, biomass power plant, bulking installation and trading of palm oils and fats products.

Side-by-side Comparison

Capitalization
Measure by size, both companies are similar, KWANTAS is slightly bigger than BLDPLNT, 43 millions approximately.

Income Items
Important items under this section is per share earnings and dividend, BLDPLNT is the all-time winner.

Balance Sheet Items
BLDPLNT has much stronger and healthier balance sheet compared to KWANTAS.

Ratios
On the first glance, KWANTAS is more attractive by looking at Price/earnings ratio, given 5.41 times earning. But it is not the case when look into the following items:

1. Price/earnings, 2009-2011: BLDPLNT has more appropriate valuation compared to KWANTAS, 11.42 times earning and 38.6 times earning.
   
2. Current assets/current liabilities: BLDPLNT has adequate level of working capital, where KWANTAS was at alarming level, short of 30%.
   
3. Earning growth per shares: Both near-term and long-term of earning growth of KWANTAS is negative.
   

Price Record
The current price level of BLDPLNT reaching it record level since it listed in 2003, where KWANTAS at the low end of it's historical price level.

As conclusion, the winner of this comparison is BLDPLNT.

Financial Summary

BLDPLNT's Financial Summary

By looking into detail of the financial summary of BLDPLNT, it show a amazing historical growth records with one exception in financial year 2009.

The recent return on average equity (hereafter called "ROAE") is in appropriate level, but return on average asset (hereafter called "ROAA") and profit margin is in single digit. I think this is due to the company involved in trading business.

How Much BLDPLNT Worth?
Given the company CAGR of EPS is 20% (approximately 37.4% in the past 5 years) and Dividend Per Share is 10% in the next 10 years, the EPS of the company will be RM$1.104 in 2020 (included adjustment of 2 bad years in 10 which reduce 50% of group's net profit) and the forecast dividends received over the 10 years period totaling RM$0.98 (included adjustment of 2 bad years).

If the stock price of BLDPLNT sell at 10 times earning in 2021, it is RM$11.04 and included total dividends received, it is RM$12.02 per share. Given annual 6% inflation rate in next 10 years, the discounted rate is 0.591898. So, RM$12.02 discounted to today price, it is RM$7.11 per share.

The discounted price is merely 4.14% higher comparing to today (24 November 2011) closing price RM$6.83. I don't think the stock is undervalued, what do you think?

I'd love to hear your comments!