Deep-dive 2021-10: United Plantations

United Plantations (UPL MK) is one of the best-managed oil palm plantation companies in the world.

With most of its estates in the Malaysian state of Perak, United Plantations has production yields per tonne far above its Malaysian peers. And thanks to vertical integration, it has become a low-cost producer with cost per tonne at the lower end of the industry. Operational excellence has enabled United Plantations to earn a 30%+ operating margin in most of its recent history.

The company’s corporate governance track record and sustainability ratings are excellent. Few related party transactions, limited M&A, stable share count and a generous dividend policy.

Real assets tend to serve as inflation hedges during periods of high inflation. Judging from money supply indicators, budget deficits across the world and earnings call commentary, it looks like inflation pressures are building yet again. Plantation companies should help preserve purchasing power just as well as any other real ass…