Ijm Plantations Berhad

Why is the Plantation Sector Lagging Behind the Market?

Despite the bullish Malaysian stock market this year, the plantation sector has been lagging behind. This underperformance can be attributed to fluctuations in palm oil prices and a lack of growth catalysts for earnings.

Key Factors Contributing to the Lag:

1. Earnings Volatility with Palm Oil Prices
Plantation company earnings peaked in 2022 but have been on a decline since. The Russia-Ukraine war disrupted the supply of sunflower oil from the Black Sea region, pushing global buyers to seek alternatives like palm oil. This led to a price surge, driving record earnings for many plantation companies during 2021-2022. However, in 2023, palm oil prices fell from over RM7000 to the current RM3500-4000 per ton. Despite this drop, prices are still 40-50% higher than the historical average of RM2700 before 2021, which helps offset rising production costs. Future demand is influenced by global economic conditions, but supply constraints, aging oil palm trees, and slower-than-expected replanting in Malaysia are likely to support palm oil prices. With lower fertilizer costs and improved productivity, plantation companies are expected to achieve stable earnings.

2. Environmental, Social, and Governance (ESG) Issues
Despite attractive measures by the Malaysian government, there is a lack of local interest in plantation work, leading to a reliance on foreign labor, which accounts for 85% of the workforce in the sector. This exposes companies to risks related to labor exploitation and rights maintenance.

3. Lack of Long-Term Value Drivers Leading to Low Valuations
According to the Malaysian Palm Oil Board (MPOB), Malaysia's plantation area has stagnated over the past five years. After reaching a peak of 5.9 million hectares in 2019, the area decreased to 5.65 million hectares in 2023. This is due to bans on developing primary forests and peatlands for oil palm cultivation and a cap on plantation areas at 6.5 million hectares. With limited land, companies are focusing on increasing productivity and operational efficiency. The fastest way to enhance profitability is through mergers and acquisitions, such as $KLK / 2445 (KUALA LUMPUR KEPONG BERHAD)'s RM1.53 billion acquisition of $IJMPLNT / 2216 (IJM PLANTATIONS BERHAD)’ 56.2% stake in 2021, which increased its plantation area by 28.7% to 274,688 hectares.

4. Low Trading Volume
The trading volume in the plantation sector remains low, especially when compared to sectors currently benefiting from the data center construction boom.

These factors collectively explain why the plantation sector in Malaysia has underperformed, despite the broader market's positive trends.

Event Driven Trade - Merger & Acquisition Arbitrage

Throughout the years journaling my investment journey in Stockbit, I often get the most comments / DMs / PMs / engagements from friends in the platform whom had learned a thing or two, or celebrating together successful closure of an event driven trade. These deals were often lower risk in nature, whilst having a pretty decent absolute return and even more so on per annum basis, perhaps due to the inefficiency of the market.

Some past low risk event-driven trade ideas and threads of the past:

1) $SPB / 1783 (SELANGOR PROPERTIES BERHAD) SELANGOR PROPERTIES BERHAD, Nov 2018. 17% absolute return within months. Link: https://cutt.ly/AGZ1feq

2) $TAGB / 5158 (TA GLOBAL BERHAD) TA GLOBAL BERHAD, June 2020. 22% absolute return within months. Link: https://cutt.ly/1GZ1fbR

3) $BIMB / 5258 (BIMB HOLDINGS BERHAD) WA, Dec 2020. 24% absolute return within months. Link: https://bit.ly/3saXHOo

4) $IJMPLNT / 2216 (IJM PLANTATIONS BERHAD) and $MMCCORP / 2194 (MMC CORPORATION BERHAD), June 2021. 5% and up to 25% absolute return within months. Link: https://bit.ly/3sbYH51

5) RAZER INC (1337 HK), Feb 2022, 15% absolute return within months. Link: https://bit.ly/3sbLGIM

~~

Anyhow... Warren Buffett addressed this in a very layman manner in his recent Berkshire AGM, when he touched on his Activision Blizzard shares ownership - of which BRK now owns 9.5%. I often wonder whether my posts on this topic is / was understood by many, so here's uncle Warren's explanation on "work outs aka arbitrage"

https://bit.ly/3w3teTM

- BRK fund managers bought 15m shares of activision in 2021

- In mid Jan, Microsoft to acquire Activision at USD 95 per share

- Buffett then said that Activision "become a different kind of security... an arbitrage."

- Buffett the continues that an arbitrage is a "stock whose value depends not on what the market price does but whether a given announced corp event occurs."

- Buffett then purchase Activision HIMSELF for this arbitrage event. He mentioned that in an arbitrage, you should "spend alot of time on analysis of announced deal going through"... and that "has to bet big as profit is limited" whils also warning that "the deal may blows up and who knows what happen".

Do take a listen! In current volatile market, low risk event driven trades are worth pursuing!

In Stockbit, we have discussed a number of real life examples for hedging, arbitrage, and speculation to the benefit of all users there. In this post, let’s talk about what these methods are and some examples of them. We hope these pieces of knowledge can help Stockbitors make more informed decisions when analysing these kind of events.

What other potential trading opportunities did you discover? Let’s discuss them together on Stockbit!

$MMCCORP / 2194 (MMC CORPORATION BERHAD) $IJMPLNT / 2216 (IJM PLANTATIONS BERHAD) $KANGER / 0170 (KANGER INTERNATIONAL BERHAD)

#stockbit #startwithstockbit #bursa #klse #klci #stockmarket #saham #investment #community #hedging #arbitrage #speculation #purchase #sale #assets #trading #finance #stockbitMY

M&A Event Driven Trade - 1337 HK, RAZER INC

This could be of interest to stockbitors who liked past deals like $IJMPLNT / 2216 (IJM PLANTATIONS BERHAD) $MMCCORP / 2194 (MMC CORPORATION BERHAD) $SPB / 1783 (SELANGOR PROPERTIES BERHAD)

I'm sure everyone in Stockbit knows Razer.

On December 1, 2021 - Razer announced a pre-conditional Scheme from its founders and CVC to buy the company at HK$2.82/share.

Yesterday, the pre-conditions had been fulfilled. The next key conditions for the delisting will be the headcount test and approval by at least 75% independent H-shareholders (<10% of all independent H-shareholders rejection).

This could be held in early May and possible completion of entire deal in June / July.

Consensus FV of Razer (which I'm agreeable to) is around HKD 2.30- HKD 2.60, means that the offer is good price. Additionally, recent market condition means closest peer Logitech had some multiple de-rating, making the offer price even more attractive.

Price before rumours of the deal happening or the break away price was around HKD1.80 which I think is pretty "value".

All in all, the spread is at around 12% absolute with completion ranging 4-5 months. Annualised return could be up to 37%. Risk reward feels reasonable.

This is a low risk event driven trade idea for those who wants to counter recent choppy market.

@zhexiangxd @mengteck @zhengyou0705 @Jay888 @facademy @Goldenhorse77

NOTICE PURSUANT TO SUBSECTION 223(2) OF THE CAPITAL MARKETS AND SERVICES ACT 2007 IN RESPECT OF THE UNCONDITIONAL MANDATORY TAKE-OVER OFFER BY KUALA LUMPUR KEPONG BERHAD THROUGH RHB INVESTMENT BANK BERHAD

TAKE-OVERS & MERGERS (PARAGRAPH/RULE 9.19 (47A))

Delisting of Securities

IJMPLNT - DELISTING OF THE ENTIRE ISSUED SHARE CAPITAL OF IJMPLNT FROM THE OFFICIAL LIST OF BURSA MALAYSIA SECURITIES BERHAD

Changes in Sub. S-hldr's Int (Section 138 of CA 2016) - GRATEFUL BLESSINGS INC.

Changes in Sub. S-hldr's Int (Section 138 of CA 2016) - GRATEFUL BLESSINGS FOUNDATION

DEALINGS IN LISTED SECURITIES (CHAPTER 14 OF LISTING REQUIREMENTS) : Dealings Outside Closed Period

Changes in Director's Interest (Section 219 of CA 2016) - TAN SRI DATO’ SERI LEE OI HIAN

Changes in Sub. S-hldr's Int (Section 138 of CA 2016) - HIGH QUEST ANSTALT

Changes in Sub. S-hldr's Int (Section 138 of CA 2016) - GRATEFUL BLESSINGS FOUNDATION

Changes in Sub. S-hldr's Int (Section 138 of CA 2016) - KUALA LUMPUR KEPONG BERHAD

Changes in Sub. S-hldr's Int (Section 138 of CA 2016) - BATU KAWAN BERHAD

Changes in Sub. S-hldr's Int (Section 138 of CA 2016) - GRATEFUL BLESSINGS INC.

Changes in Sub. S-hldr's Int (Section 138 of CA 2016) - HIGH QUEST HOLDINGS SDN BHD

Changes in Sub. S-hldr's Int (Section 138 of CA 2016) - TAN SRI DATO' SERI LEE OI HIAN

Changes in Sub. S-hldr's Int (Section 138 of CA 2016) - ARUSHA ENTERPRISE SDN BHD

Changes in Director's Interest (Section 219 of CA 2016) - TAN SRI DATO’ SERI LEE OI HIAN

Changes in Sub. S-hldr's Int (Section 138 of CA 2016) - DI-YI SDN BHD

Changes in Sub. S-hldr's Int (Section 138 of CA 2016) - CUBIC CRYSTAL CORPORATION

Changes in Sub. S-hldr's Int (Section 138 of CA 2016) - DATO' LEE HAU HIAN

Changes in Sub. S-hldr's Int (Section 138 of CA 2016) - WAN HIN INVESTMENTS SDN. BERHAD

MONTHLY PRODUCTION FIGURES (MINING / PLANTATION / TIMBER)

IJM Plantations $IJMPLNT / 2216 (IJM PLANTATIONS BERHAD)
Research by UOBKayHian
HOLD (Maintained): Target Price RM3.10


"To Be Privatised In Dec 21 By KLK "

IJMP had been fully acquired by KLK with a major shareholding of 94.85% as of 22 Nov 21. KLK is likely to be the largest market cap plantation companies in Bursa upon the completion of the privatisation exercise. IJMP is expected to be delisted by end-Dec 21. We reckon that the strong upcoming earnings from IJMP would have a positive impact on KLK. With these, we are ceasing coverage on IJMP. The last call is HOLD with target price of RM3.10.


Jacquelyn Yow Hui Li
T +603 2147 1995
E jacquelyn@uobkayhian.com

Leow Huey Chuen
T +603 2147 1990
E hueychuen@uobkayhian.com

OTHERSIJM PLANTATIONS BERHAD ("IJMP" OR COMPANY")

APPLICATION FOR WITHDRAWAL OF LISTING OF IJMP FROM THE OFFICIAL LIST OF BURSA MALAYSIA SECURITIES BERHAD ("BURSA SECURITIES") PURSUANT TO PARAGRAPH 16.07(a) OF THE MAIN MARKET LISTING REQUIREMENTS OF BURSA SECURITIES ("LISTING REQUIREMENTS") ("PROPOSED DE-LISTING")

IJM Plantations $IJMPLNT / 2216 (IJM PLANTATIONS BERHAD)
Research by HLIB
CEASED (from Hold): Target Price: RM3.10

"Boosted by higher prices"

IJMP’s core net profit of RM161.1m in 1HFY22 (+272.7%) beat expectations,
accounting for 84.5-86.8% of our and consensus full-year estimates, due mainly
to higher-than-expected realised palm product prices. We are ceasing coverage
on IJMP, as the offeror (KLK) has secured 90% of IJMP shares and IJMP will be
delisted from Bursa Malaysia with effect from 26 Nov 2021.


Chye Wen Fei
E wfchye@hlib.hongleong.com.my
T (603) 2083 1712

IJM Plantations $IJMPLNT / 2216 (IJM PLANTATIONS BERHAD)
Research by AffinHwang Investment Bank
Ceasing coverage: Price Target: N.A


"Strong 6MFY22 results; soon to be delisted"

IJMP posted a core net profit of RM150.1m in 6MFY22, up more than 100% yoy,
thanks to strong CPO selling prices. 6MFY22 results came in above our expectations, mainly attributable to betterthan-expected margins. We cease coverage on IJMP as it will soon be delisted given that KLK now holds more than 90% of its shares.

Nadia Aquidah
T (603) 2146 7528
E nadia.subhan@affinhwang.com