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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.