Not Rated Note:
Eagle High Plantations (BWPT IJ, NR)
Flying High Like An Eagle
Eagle High Plantations (BWPT IJ, NR)
Flying High Like An Eagle
FELDA’s
acquisition price is equivalent to IDR580/share (vs current price of IDR298)
whilst potential earnings recovery could be a catalyst for unlocking Eagle
High’s share price in our view. We met with its investor relations personnel
last week and management estimates its 4Q16 and FY17 FFB production to grow by
12%YoY and 30%YoY respectively. They also guided on continued production
recovery since September, and that the current CPO price level should enable
Eagle High to book positive earnings in 4Q16. We do not have a rating on the
stock. At current EV/ha of USD10,069, it is trading at the lower range of our
plantations universe.
¨ 37% stake for
USD505.4m impliesIDR580 per share. Federal Land Development Authority (FELDA)
through its subsidiary, FIC Properties Sdn Bhd (FICP) has signed a sales and
purchase agreement (SPA) with Rajawali Group to acquire 37% of Eagle High
Plantations (Eagle High) (BWPT IJ, Not Rated) for USD505.4m– this implies EV/ha
of USD15,035, which is within the EV/ha range of plantation companies under our
coverage (Figure 2).
¨ Favourable nucleus
plantation age profile. In 2016, c.73,167haor 64.5% of
Eagle High’s nucleus matured plantation of 113,432hawas in the increasing FFB
yield phase (aged 4-8 years) (Figure 4). This favourable age profile should be
a key driver for sizable palm oil production growth in the years ahead.
¨ FFB yield should
normalise. Eagle
High’s FFB production over the last two years was below expectations(Figures5,
6 and 7) as its FFB yield was lower than normal. The main culprit was prolonged
lack of rainfall at its estates in 2H14 and 2H15. Prolonged rainfall of
below100mm/month decreases FFB yields. Abundant rainfall during 2016 should
normalise its FFB yields, which should boost its production going forward, in
our opinion.
¨ Targeting to reach
FY17F FFB production growth of 30%YoY. Management guided that its FY17F FFB
production is expected to increase by 30%YoY on the back of:
i. Recovery from the impact of El Nino and lack of
rainfall in 2H14 and 2H15;
ii. Favourable plantations age profile;
iii. Sizable plantation area in increasing FFB yield phase
(aged 4-8 years).
The increase in production should improve its
earnings going forward.
¨ 9M16 net loss of
IDR303bn but management guided on earnings recovery ahead. Eagle High booked
net losses in 9M16 due to weak FFB production (below average FFB yields) and
sizable interest expenses. Management indicated that 4Q16 earnings are likely
to be positive on improvements in FFB production (Figure 8) and the current
domestic CPO price level (Figure 9).
¨ No rating. We do not have a rating on Eagle High.
At current EV/ha of USD10,069, Eagle High is trading at the lower range of our
plantation universe (Figure 2). Positive catalysts include the completion of
FELDA’s acquisition, and earnings recovery from recovery in FFB production.
Negative catalysts include FELDA’s acquisition not going through, and a lack of
recovery in its earnings.
Kindly click the following link for the full report: Eagle High Plantations : Flying High Like An Eagle
Hariyanto Wijaya,
CFA, CFP, CA, CPA
Vice President
Research Analyst – Heavy
Equipment, Plantation
PT. RHB Securities
Indonesia
