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No Bull. With respect, if you wish to invest in smaller companies you need to undertake your own research, an on going task and not to rely
on occasional superficial reviews by Investment magazines.
"but utterly" should be "but with utterly".
"no collusions"? Sorry, you've lost me. There have been no write-ups in IC on REA for a number of years (too speculative?), and the company does not calculate degrees of operating, financial and combined leverage for its shareholders, so I don't know what you are talking about, and there is no recent broker research on the company, so I don't know what you mean about repeating info in the public arena. I have forecast 8p eps attrib to the ords for FY2021 for REA, but utterly massive combined leverage, the scope for forecast error is also massive, so my forecast is as good as worthless. What's your forecast for MPE and for REA?
"No Bull" should consider employment with the I.C. Just repeating what is already in the public arena, but with no collusions!
Thanks both,
re REA, very interesting. I had never heard of. Will look into it.
REA Holdings (Epic code "RE.") is an old rubber company that is now, principally, like MPE, a palm oil producer. It's over a 100 years old, and the main shareholder, when the preference share dividend arrears are paid off and the pref shareholders consequently lose their right to vote on matters concerning the ordinary shareholders, will have approx. a 29% voting interest in the company.
REA has masses more leverage (both financial and operating) than either MPE or AEP. That makes it potentially more capable of rocketing or plummeting than AEP or MPE. Yes, it's has a speculative risk rating, whereas MPE and AEP have "adventurous" risk ratings. REA has a huge amount of debt, but if it can pay that debt off, a good deal of the approx $500m of its total assets could then become more the property of the ordinary shareholders than that of the debt financiers, were there to be a liquidation. With a market cap of about £60m, there is plenty of scope for the REA ords to multibag if, (and it's a big if), the palm oil price stays high for a long period e.g. 5 years. REA also has an interest in some non-cash generative assets, which should soon generate cash and strengthen the balance sheet and get its excessive debt down to more manageable levels, viz. the coal mine and the andesite quarry (andesite needed for road bedding material?). As to which you should buy (REA, AEP or MPE) depends on lots of things including things that are specific to you: attitude to risk, investor experience, wealth, temperament, etc. to say nothing of things like your view of the palm oil price outlook, etc. AIMO. DYOR.
Thanks NB appreciate it.
What’s REA?
MPE has first class management at all levels and a great future, so why would an intelligent person sell out for a short term gain?
AEP is still worth buying, I bought some of mine years ago at 28p! I am more than happy to buy them now!
A different temperament is required for investing in AEP: value investors need to be ultra patient. It's not good that AEP is piling up the cash doing nothing with it - it dilutes the ROCE. Of course if AEP came out with an announcement to make an acquisition that was going transform the company's growth prospects without adding excessive risk, sure, the share price would rocket. Mdm Lim could have used the cash to buy in the shares for cancellation in April 2020, but she didn't - for me, that's a bit of black mark (sure, she runs the company well, apart from the grumble over all the cash piling up). Additionally, MPE qualifies for BPR, but AEP doesn't. Finally, AEP doesn't do a lot to promote itself (no broker forecasts, although it maybe isn't difficult to do your own). I'm in REA and MPE, but I was once a shareholder in AEP before the takeover offer by Mdm Lim (in the 80s, and I vaguely recall taking up a rights issue at just over £1 after Mdm Lim took over). Yes, I get that Mdm Lim doesn't need divs, and I get that she doesn't need higher capital growth (the idle cash pile) so I do wonder what she is planning - I wouldn't want to be taken out at a derisory price. MPE is fine as long as they get plenty of extension planting done, which they have hinted they will do. I really hate seeing non-cash generative vacant land: AEP has loads of that. Hope this helps. AIMO. DYOR. - No, I don't like eps growth that reduces ROCE, so I am a bit of a fuss pot about what I like. I sold an OEIC invested in FANG stocks to buy into MPE. The OEIC had a CAGR of about 14% net of expenses over 10 years, helped by a depreciating £. I hope for that sort of CAGR with MPE. (The discount rate used, to produce the DCF valuation in the last MPE annual report of £10.99 a share, was higher than 14%.)
I would be interested in everyone’s opinion as to why people here prefer MPE over AEP. Is there a big difference?
Hi AP,
Why did u choose MPE over AEP?
This news is incredible and the market haven’t even clicked yet… reduce net debt from $78M to below $10M - prepared to pay a special dividend and looking at purchasing more land in close proximity to current operations. Also, they have benefited from increase commodity pricing, which looks to be holding reasonably strong - the companies value, quality and liquidity credentials have improved significantly; which further de-risks this investment.
I have been watching this company alongside AEP for a while and I have finally taking a position today. Only 2% increase in SP and low buying volume suggests that this is clearly unloved or under the radar - earnings release due March 21st 2022 so give time to add to my position over the coming few months.
This share never ceases to amaze!!
Production up
Debt to minimal level
Cannot believe they are still independent!!
"Bertam Properties has continued to establish profitable developments, even during the recent challenging market conditions, and is expected to add substantial value to the 70 hectares it has purchased for development, with the Group reaping its share of the benefit."
I think that means the profit from privilege, from the grant of planning permission for a change of use in the land, from the stripping out of the economic rent, is still to come. I think that means the share of profits from associates in the next few years, in particular from 40% owned Bertam Properties, is going to be a lot higher than we have been accustomed to.
Arsenal, "I have spent lots of time in Penang over the last ten years" Well, you are very lucky. I was last there 41 years ago! Yes, the land ownership rules seem very discriminatory - Mdm Lim's Anglo-Eastern only holds Cenderung on a lease, I believe. It's their only Malaysia-based plantation. I presume we only held the Bertam land freehold because of our ownership pre-dating independence, not that the same sort of rackets don't go on here in the UK what with planning authorities only giving planning permission on green field sites in national parks to build a residential property only in very exceptional circumstances, never to developers, but sometimes to favoured locals. The land value uplift can be £150,000.
A local sheltered accommodation provider 'charity' got planning permission to build a home in a field occupied by grazing sheep, and the rents charged to the human residents reflected the value of the property and land AFTER it was built. I imagine the planning permission application was advanced by stating the residents would be offered low priced accommodation. How did the planning application succeed? It helped to have a royal cipher on the application. Charities are just as aggressive at growing their 'businesses' as real businesses, and getting a £1m uplift in the land value by buying agricultural land and changing it to residential use must have done wonders for the balance sheet of that 'charity'. I guess one shouldn't criticise the rules in Malaysia as similar, less overt practices probably go on here. I recall Judy Murray having a tennis court planning application turned down on the grounds the tennis courts, which were in the back of beyond in Scotland somewhere, would cause too much light pollution - I wonder if the Planning Committee was jealous at the amount of money she was going to make from floodlit tennis courts in use 24/7? Planning authorities don't like giving away risk free profits, do they? The Town and Country Planning Act of 1947 was the biggest theft by a UK Government ever, I wonder?
Nobull
I know the rules for the Malay are hugely one sided to them
I have spent lots of time in Penang over the last ten years
The Chinese and Indians will get control in the next decade !!
This company cannot stay independent much longer IMHO
Arsenal58, yes but it makes a huge difference: scenario 1: we got the planning permission and then sold the land means we have already stripped out 100% of the economic rent, and it's already included in that $24m land sale figure, or scenario 2: our 40% owned property development property company gets the planning permission meaning we only get 40% of the economic rent stripped out and more importantly meaning the profit is still yet to materialise via some lumpy, futures "shares of associated company profits"
I doubt we would be allowed to keep 100% of the economic rent stripped out from a change of use in the land. So I believe we will only get 40% and that it is still to come simply because the Malaysian government has a policy to steer economic rents, profits from privilege, to Malaysian Malays, never to Malaysian Chinese or Malaysian Indians, so I can't imagine they would ever allow non-Malaysians to benefit 100%.
We own a percentage of the building company Nobull
I think its nearing the takeover nobody can refuse
"Hopefully something is afoot."
Yes, eps of 80p a share for FY2021, I wonder? We are actually getting some CPO price upside over $1,300 without it being subject to export levy and export tax. And they are not slacking on future production volume growth: they are doing about 10,000 hectares of EXTENSION planting. That's just brilliant. I don't understand the significance of the property transaction - usually there is a mega economic rent to be stripped out when land changes from agricultural to residential use - I am not clear whether we sold the land with planning permission or without it. The one who gets the planning permission gets the economic rent, or the profit from privilege. Is it our 40% own property development company that gets the economic rent or was it us on sale of the land? Maybe we will get a special dividend, if the amount is large.
I expected these to drop back a bit when they ex dividend. Price seems to be holding up well & creeping up. Hopefully something is afoot.
Thanks Arsenal - CPO today up to 1310 from 750 a year ago - seems to support that its not going down like they thought it might before hitting 1200.
Certainly bodes well for MPE as their crop profile is maturing crop growth, even if tempered by lower production climate conditions. Remember this is a dual edged sword anyway - as less crops usually mean higher prices.
Also note with relatively fixed production costs, these fell $50 at the interim to $335. (also note the received is not the full cpo price but about $500 lower with taxes, transport etc - still a very healthy margin business 100%+ though at these levels)
Research firms believe the price of CPO would stay higher for some time given its tight supply situation which would likely remain at least until the end of the third quarter of 2021.
MIDF Research forecast that tight inventory level would continue to add an upward pressure on CPO price movement but the price would soften in the second half of 2021.
"We opine it (the reduction in price) would not be significant in view of unresolved labour shortages due to border closure and slow production growth,” it added in a note.
Meanwhile, palm oil trader David Ng said CPO futures may continue to trade higher but he cautioned that recent high prices might deter buying interest.
For the week just ended, Malaysian CPO futures finished mostly higher, driven by concerns over weak production and lower stockpile in the country which drove the palm oil price up on Friday.
On Wednesday, the local CPO futures contract rallied above RM4,500 per tonne for the October 2021 benchmark contract -- the highest in two months -- on lower July palm oil stocks.
According to the Malaysian Palm Oil Board, CPO stocks for July 2021 fell 11.85 per cent to 703,886 tonnes from 798,482 tonnes in June.
CPO output dropped by 5.17 per cent to 1.52 million tonnes against 1.61 million tonnes in the previous month.
On a Friday-to-Friday basis, August 2021 gained RM10 to RM4,530 per tonne, September 2021 increased RM190 to RM4,610 per tonne, October 2021 added RM237 to RM4,511 per tonne, November 2021 improved RM242 to RM4,398 per tonne, December 2021 rose RM234 to RM4,309 per tonne, and January 2022 climbed RM220 to RM4,233 per tonne.
Weekly volume fell to 226,304 lots from 295,273 lots in the previous trading week, while open interest slid to 244,987 contracts versus 249,744 contracts previously.
The physical CPO price for August South went up RM70 to RM4,670 a tonne on Friday. - Bernama
KUALA LUMPUR: The crude palm oil (CPO) futures contract on Bursa Malaysia Derivatives is likely to trade higher next week on low production.Speaking to Bernama, Singapore-based Palm Oil Analytics owner and co-founder Dr Sathia Varqa said the fundamentals of lower stockpiles and high exports were supportive of higher palm oil prices.He said cargo surveyor Societe Generale de Surveillance reported that Malaysia’s Aug 1-10 export was up by four per cent, defying lower estimates from Intertek Testing Services and AmSpec Agri Malaysia which expected a decline of 13 per cent and 10 per cent, respectively."Next week, trading will be based on mid-month August export which is expected to build on the gains from Aug 1-10,” he said, adding that prices might also fall due to profit taking.
I hope you are right arsenal as I have been waiting a few years now for KLK to bid again. I bought some more of these today and now hold 5000.
Punter
We are worth more now for them in many ways
Land and property in Malaysia they would live to get their hands on
Plus Indonesia openings are young and ripe for large expansion
They still hold a large stack of shares also
All in good time as per usual