KUALA LUMPUR: PT Eagle High Plantations’ potential earnings rise and Felda’s acquisition could be a catalyst for unlocking the Indonesian firm’s share price, said PT RHB Securities Indonesia.
In a research report titled “Flying High Like An Eagle”, RHB Securities said the company’s favourable tree age profile should be a key driver for sizeable palm oil production growth in the years ahead.
“The current crude palm oil price level should enable Eagle High to book positive earnings in the fourth quarter of 2016.
“Eagle High’s FFB (fresh fruit bunch) production over the last two years was below expectations, as its FFB yield was lower than normal.
“The main culprit was prolonged lack of rainfall at its estates in the second half of 2014 and the second half of 2015,” it said.
RHB Securities said management guided that its 2017 financial year FFB production was expected to rise by 30 per cent year-on-year due to:
RECOVERY from the impact of El Nino, and lack of rainfall in the second half of 2014 and second half of 2015;
FAVOURABLE plantations age profile; and,
SIZEABLE plantation area in increasing FFB yield phase (aged 4 to 8 years).
The increase in production should improve its earnings going forward, it said.
At a current Enterprise Value per hectare of US$10,069, Eagle High is trading at the lower range of RHB Securities’ plantation universe.
RHB Securities said positive catalysts included 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.