EHP’s plantation age profile the key driver for production growth
KUALA LUMPUR: RHB Research’s Indonesian subsidiary expects PT Eagle High Plantations Tbk (EHP) favourable plantation age profile to be a key driver for sizable palm oil production growth in the years ahead.
PT RHB Securities Indonesia vice president Hariyanto Wijaya said as of this year, 73,167 hectares or 64.5 per cent of EHP’s 113,432-hectare nucleus mature plantation are in the increasing fresh fruit bunch (FFB) yield phase, aged four to eight years.
He said with EHP’s FFB production being below expectations over the last two years due to prolonged lack of rainfall in the second half of 2014 and 2015 respectively, abundant rainfall this year would help production to recover going forward.
“Abundant rainfall during 2016 should normalise its FFB yields, which should boost its production going forward, in our opinion,” he said in a research note today.
He added that EHP management indicated that the fourth quarter 2016 earnings are likely to be positive on improvements in FF B production and the current domestic crude palm oil price level.
Hariyanto said EHP management has also forecast FFB production for financial year 2017 to increase by 30 per cent year-on-year on the back of a recovery from the impact of El-Nino and lack of rainfall in the second half of 2014 and 2015 respectively.
He said the improvement in production would also be contributed by favourable plantation age profile and sizable plantation area in the increasing FFB yield phase.
“The increase in production should improve its earnings going forward,” he added.
Meanwhile, on EHP’s stake acquisition by the Federal Land Development Authority (FELDA), he said the 37 per cent stake acquisition for US$505.4 million (RM4.47 per dollar) implies an equity value per hectare (EV/ha) of US$15,035.
“This is within the EV/ha range of plantation companies under our coverage.
“At current EV/ha of US$10,069, EHP is trading at the lower range of our plantations universe,” he added. — Bernama