3 Things Investors Should Know About This Mid-Sized Oil Palm Company, United Plantations

One of the industries that is dominated by Southeast Asia is the palm oil industry.

Within this industry, there are many companies listed in Singapore, such as Wilmar International Limited (SGX: F34), Golden Agri-Resources Ltd (SGX: E5H), First Resources Ltd (SGX: EB5), and Bumitama Agri Ltd (SGX: P8Z).

The same goes for Malaysia’s stock exchange, Bursa Malaysia. In this article, I want to take a closer look at one of the medium-sized Malaysia-listed palm oil companies, United Plantations Berhad (KLSE: 2089.KL).

United Plantations has around 50,000 hectares of plantation that’s spread across Malaysia (80%) and Indonesia (20%). Here are three things about United Plantations’ business that may interest investors:

1. Consistent profitability over the last decade

From 2006 to 2015, United Plantations has been consistently profitable. What’s more, both its revenue and profit have nearly doubled in that period. The company’s top-line of RM597.5 million in 2006 had grown to RM1.0 billion in 2015 while its profit had jumped from RM150 million to RM291.6 million.

Those numbers work out to a compound annual growth rate of 5.9% for revenue and 7.7% for profit.

2. Plantation statistics

One of the main factors that will affect the profitability of a palm oil producer is its efficiency. There are two types of efficiency here: The fresh fruit bunches yield and the extraction rates. I want to focus on the former here, which measures the amount of fresh fruit bunches harvested per hectare.

For United Plantation, its FFB yield in Malaysia and Indonesia in 2015 were 24.2 tonnes and 20.0 tonnes per hectare, respectively. For perspective, the FFB yield per hectare for Bumitama and the Malaysia-listed Kuala Lumpur Kepong Berhad (KLSE: 2445.KL) were 17.8 and 22, in 2015, respectively.

3. Historical dividends

United Plantation has consistently paid out an annual dividend from 2006 to 2015. In fact, during that period, the company’s dividend had increased from RM0.35 per share to RM1. This translates into a compound annual growth rate of 12.4%.

At the company’s current share price of RM27.80, this translates into a historical dividend yield of 3.6%.

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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 contributor Lawrence Nga doesn’t own shares in any companies mentioned.