United Plantations 2022 update

An update to the April 2021 report on United Plantations. Estimated reading time 19 mins.

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Summary

• My original report on Malaysian oil palm plantation company United Plantations made the case that it’s one of the industry leaders in terms of efficiency and capital allocation.

• The long-term global supply & demand for crude palm oil seems to suggest continued tightness. Demand keeps growing at almost 7% per year, while Malaysian production will stay flat and Indonesian production won’t rise much until 2025.

• Indonesia’s recent removal of its export ban and the planned temporary removal of its export levy will cause a short-term hit to global prices for crude palm oil. The spot price has fallen from over MYR 7,000/tonne to MYR 4,000. It’s hard to say where the market will clear.

• Assuming that the spot price remains at MYR 4,000/tonne, United Plantations will likely end up at a P/E ratio of 9-10x, below its historical average of about 17x. A historical dividend payout ratio of 80% would imply a dividend yield of 8-9%.

1. Introduction to United Plantations

I wrote my report on Malaysian oil palm plantation company United Plantations (UPL MK / 2089 KL — US$1.3 billion) last year in May 2021. You can find the entire presentation here or by clicking the picture below.

Here is a summary of it: