Saturday, February 20, 2010

The next stock on my list: Tradewind Plantation

I've been calling to buy something have not done anything for Turtle portfolio yet. With the CPO price is hanging around RM 2,500. I'm quite serious this time to call Tradewind Plantation a buy. Annualized their latest quarter ended 31 Dec 2009 will make it an interesting trade.

Why I call it a trade and not a long term buy? It's because of its high level of debt of close to about RM 940 million debt(long term and short term in nature) that pull me back a little. A stretched balance sheet will make it a bit difficult to expand more aggressively. In the unlikely event of commodity price collapse, Tradewill will sure kena. This is a major issue for me to declare all greens.

The biggest potential that I see in this company is the potential of its landback that will double the current output in the next few years

This company has about 140 hectares of land but only half of them are matured. The other half are still young or under development.

Market is valuing this company for RM 1.53 x 629 million shares = 962 million or anualizing the current quarter, this company is selling for 7 times earning. For a company that have half of IOI Corp hectares which are selling for 20 times earning, I see potential for re-rating to 10X earning will drive the stock price to RM 2.30. In long-term(7 years from today) along the bumpy rides, CPO at RM 2,200-RM 2,500/MT, I see this company has a potential to deliver RM 0.50 earning per share, so I will leave it to you to speculate that potential share price if you apply 10X multiple. At the current quoted price, gross dividend yield is about 3.9%.

Disclosure: The author has long trade positions.

1 comment: said...

Great analysis! I will put in into my watch list & buy when I am satisfy.