Singapore’s Cheapest Farmers

PalmTreesJim Rogers once told me that he would rather be a farmer than an investment banker in 2018. What could he possibly mean by that?

It’s quite simple, if not a tad frightening. He said that in 10 years’ time, the average age of farmers in Japan will be 76. In the US they would be 68 and in Australia they would be pushing 70.

Farming has been a terrible business over the last 30 years. But that could all change. Farmers are a dying breed, so the few who are left tilling the land will, according to Rogers, make fortunes. He reckons that they will have to, or we are not going to have any food, at any price.

Given that farming could have a rosy future, where could Singapore investors look for agricultural opportunities?

Interestingly, we don’t have to dig too deep because there are no fewer than 10 farmers quoted on the Singapore market. They include rice farmers, palm oil planters, sugar cane growers and a farmer, Yamada Green Resources, which specialises in cultivating shiitake mushrooms and black fungus.

The table below details five biggest farmers in Singapore listed in reverse order of their dividend yields, which can be a measure of relative cheapness.

Name price ($) Market Cap Yield
Olam International (SGX: O32) 1.67 $3.9b 2.4%
First Resources (SGX: EB5) 1.80 $2.9b 2.2%
Golden   Agri-Resources (SGX:  E5H) 0.61 $8.1b 1.9%
Noble Group (SGX: N21) 1.18 $7.7b 1.9%
Wilmar Intl. (SGX: F34) 3.39 $21.9b 1.5%

Source: Capital IQ

Sugar & Spice

Olam, which is headquartered in Singapore, has been involved in agriculture since 1989. Although it is renowned as a palm-oil producer, its agricultural exposure goes beyond growing palm trees. It is involved in rice, sugar, spices, and it is also a leading supplier of nuts of different varieties. Shares in Olam have never quite recovered their former poise following allegations by Muddy Waters of accounting irregularities, which Olam disputes. That could explain the relatively high yield of Olam shares.

Palm power

First Resources manages more than 146,000 hectares of oil-palm plantations. It also operates 11 palm-oil mills in Indonesia. The company is vertically integrated, which means that it controls both upstream and downstream operations. Its mills can process up to 3.8 million tonnes of fresh fruit bunches, while its refinery and fractionation facilities can handle up to 250,000 tonnes of crude palm oil. The company also has a biodiesel plant that uses stearin as a starting material.

Come fry with me

Golden Agri-Resources, which owns around 460,000 hectares of palm-tree plantations in Indonesia, has taken vertical integration to another level. It not only grows, crushes, mills and processes palm oil but it also sells two of Indonesia’s leading brands of cooking oil – Filma and Kunci Mas. Apart from Indonesia, Golden Agri-Resources also sells cooking oil, margarine and butter oil substitutes in China, where it also has deep sea port and storage facilities.

Agriculture may not be the most glamorous stock in the investing universe. But if Jim Rogers is right, farmers could be as influential in tomorrow’s economy as investment bankers are today.

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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Singapore Director David Kuo doesn’t own shares in any companies mentioned.