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Koon Yew Yin 8 May 2022

Investors must examine the 5-year palm oil price chart below carefully to make the right investment decision. It shows that palm oil was selling around RM 2,500 per ton for many years before. It began to shoot up from April 2020 to close at Rm 7,385.00 per ton on 5 May 2022. In the last 2 years, it has been breaking its old record to make new record high price so often.

What is the right investment decision? All plantation stocks have been going up higher and higher in the last few months and many less informed investors have been selling to take profit. In my opinion, investors should not sell plantation stocks so quickly because high palm oil price will be maintained for at least in the next 2 quarters. All plantation companies should report higher profit for their first quarter ending March which should announced before the end of this month, May. You should just wait patiently.

3 factors to support high palm oil price:

1) Indonesia’s palm oil export ban.

2) Malaysian Ringgit depreciation as shown

on the US$ exchange to Ringgit chart below. All plantation companies will make additional profit due to foreign exchange advantage.  

3) The Ukraine-Russia conflict has affected Sunflower oil export as Ukraine and Russia produces about 80% of Sunflower oil in the world. In fact, they have missed the planting season for the year.

Subur Tiasa is the best plantation stock to buy:

A few days ago, I rang Subur Tiasa Head Office, telephone number 084-211555 to verify its latest earning per share (EPS) of 16.15 sen. Its accountant told me that 16.15 EPS was for 2 months because the company wanted to change its financial year from ending in July to December. Subur Tiasa’s EPS should be adjusted for 3 months to compare it with other plantation stocks. Subur Tiasa’s EPS for 3 months should be 16.15 ÷ 2 X 3= 24.2 sen. 

Comparison plantation stocks based on historical PE ratio which is too conservative because all plantation companies should be making and more profit in the next few quarters.  

Name Price Rm Latest EPS Latest EPS X4 Price ÷EPS X4
Subur 2.10 24.2 96.8 2.17
Cepat 1.13 7.74 31.0 3.6
SOP 6.45 36.44 Rm1.56 4.1
Jaya Tiasa 1.05 5.28 21.12 5.0
Sarawak Pl 2.96 11.66 46.6 6.4
Hap Seng 3.13 11.79 47.2 6.6
Ta Ann 6.03 21.8 82.2 7.2

Subur Tiasa is the cheapest as shown above.



https://koonyewyin.com/2022/05/08/palm-oil-price-chart/
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