Posted on August 27, 2011, SaturdayKUCHING: Sarawak Oil Palm Bhd (SOPB) recorded a strong quarter earnings of RM123.9 million on the back of stronger palm oil prices and higher sales volume.
SOPB’s earnings for the first half of financial year 2011 (1HFY11) grew 136 per cent year-on-year (y-o-y) with an increase of 74.1 per cent for revenue growth. Earnings before interest, tax, depreciation and amortisation (EBITDA) more than doubled and its EBITDA margin for the quarter managed to expand despite lower on-quarter (q-o-q) prices as sales volume for the season increased.
“Even after a strong first quarter (1Q), 2Q earnings grew 28.6 per cent on-quarter (q-o-q) and itself accounted for 37 per cent of our previous RM188.2 million FY11 full year forecast,” said OSK Research Sdn Bhd (OSK Research) in its research note.
On the production front, the group saw commendable growth for the first half of the year, with its 1HFY11 fresh fruit bunch (FFB) production leaped 30.3 per cent y-o-y to 365,154 tonnes. Crude palm oil (CPO) production on the other hand had experienced an even greater jump of 43.5 per cent.
To recap, FFB production picked up further momentum in the second quarter (2Q), growing at a rate of 35.3 per cent y-o-y after a 23.9 per cent rise in 1Q. The group’s average CPO selling prices, however, tracked closely to the country’s average and fell 8.1 per cent q-o-q.
SOPB’s 1HFY11 FFB production was in line and has represented 45 per cent of the research house’s full year forecast and after some valuation; analyst expected a 23 per cent increase in FFB production for the remaining FY11.
“We are raising our earnings forecast to RM220.3 million and RM188.8 million for FY11 and FY12 respectively from RM188.2 million and RM170.6 million previously, as we narrow the company’s average CPO selling price discount relative to the Malaysian Palm Oil Board average,” highlighted the research firm.
Historically, SOPB’s average selling prices had been below the national average. This discount, however, had narrowed steadily from 9.5 per cent in FY08 to 2.7 per cent in FY10.
Moving ahead, in tandem with prices transacted in Sarawak, the discount that was experienced by the company so far this year had according to analyst been less than 0.5 per cent. The price discount in the state relative to the national average was 0.9 per cent year to date.
OSK Research pegged SOPB at a fair value of RM5.22 on a 12 times earnings per share (EPS) pegged against 12 months ending June next year from FY11 EPS previously.