Increased production and a rising crude palm oil (CPO) price saw
The crude palm oil price averaged $1,124 per tonne in 2011, more than 25 per cent higher than the previous year as a result of rising consumption in key markets such as India and China and weak global soybean production, which meant demand for edible oils outstripped supply. Anglo-Eastern expects these fundamentals to remain in place throughout the first half of 2012.
Chairman Lim Siew Kim believes the CPO price should trade in the region of $900 to $1,200 per tonne in the period, but many are more bullish. Standard Chartered's economists, for example, believe that wider industry under-investment in plantations mean that CPO production could come under pressure in the coming years, and that CPO output may not experience the usual La Nina-induced uplift.
Anglo-Eastern itself says that it is too early to tell whether La Nina will help to replenish soil moisture in Indonesia and Malaysia, and dry weather meant new plantings were behind schedule at 4,800 hectares. However, a further 9,000 hectares will be added in the next two years, and favourable weather meant production was up 13 per cent in the first two months of 2012.
|ANGLO-EASTERN PLANTATIONS (AEP)|
|ORD PRICE:||795p||MARKET VALUE:||£314m|
|TOUCH:||790-800p||12-MONTH HIGH:||811p||LOW: 591p|
|DIVIDEND YIELD:||0.5%||PE RATIO:||8|
|NET ASSET VALUE:||950¢||NET CASH:||$84m|
|Year to 31 Dec||Turnover ($m)||Pre-tax profit ($m)||Earnings per share (¢)||Dividend per share (¢)|
Ex-div: 7 Jun
Payment: 9 Jul
Anglo-Eastern's mature plantations leave it well positioned to take advantage of a strong CPO price, and on a PE ratio of eight the shares remain a buy.
Last IC view: Buy, 680p, 31 Aug 2011
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