Plantation: THPlant vs TDM [Part 2]: Fundamental

In [Part 1], we’ve talked about some of its company background, and FFB yield, which I think is the one of the most important aspect to all plantation companies.

We shall talk about its financial background now.

1. 5 years revenue & PAT (Profit After Tax) comparison:

If we compare revenue & PAT over the last 5 years (for TDM & last 4 year for THPLANT), TDM growth with PAT for TDM has grown > 100% for last 2 years which is very impressive!

Round 1 Comparison Result: THPLANT vs TDM –> 0:1

2. 5 years EPS comparison:

THPLANT achieved a consistency of continuous growth of EPS over 20% for last 4 years.

In year 2006, there was a –7% growth of EPS for TDM, however, over the last 2 years in EPS has grown around 150%.

Round 2 Comparison Result: THPLANT vs TDM –> 0:2

3. Profit Margins comparison:

In terms of Profit Margins, let’s take the Net Profit/Revenue over the last 5 years for comparison.

Table above shown that THPLANT’s profit margin is higher compared with TDM, with an average of > 20% profit margin in the last 4 years.

Even TDM profit margin is lower compared to THPLANT (ranging from 6-26%), however, one notable items is that, its profit margin is growing in a rate of > 70% for the last 2 years.

I will give THPLANT 1 point here for the consistence of the improving profit margin.

Round 3 Comparison Result: THPLANT vs TDM –> 1:2

4. Dividend yield comparison:

Both counters also have dividend payout, based on current pricing, the DY for TDM is better than THPLANT and also better rate compared with our FD interest rate.

THPLANT is having better dividend payout prior in 2007-2008. However, the % of the payout has been reduced year by year. Compared to the yearly increasing rate for TDM.

I would give TDM another point for this.

Round 4 Comparison Result: THPLANT vs TDM –> 1:3

5. 5 years ROE comparison:

Even though ROE for TDM improved from 3% to 16%(which is consider a good ROE > 15%).

In terms of ROE, THPLANT having ROE over 20% for last 3 year, which is really great!!!

Round 5 Comparison Result: THPLANT vs TDM –> 2:3

6. Current Ratio & Acid Ratio:

Let take the 2008 annual report for comparison.

Current Ration:

TDM: Current Assets = 233,979, Current Liabilities = 198,852

THPLANT: Current Assets = 131,410, Current Liabilities = 142,386

TDM = 233,979/198,852 = 1.17

THPLANT = 131,410/142,386 = 0.92

Acid Ratio:

TDM: Inventories = 33,123

THPLANT: Inventories = 39,654

TDM: (233,979-33,123)/198,852 = 1.01

THPLANT: (131,410-39,654)/142,386 = 0.64

Both Current & Acid ratio for TDM are in more healthy level (>1) compared with THPLANT.

Round 6 Comparison Result: THPLANT vs TDM –> 2:4

7. Price to NTA comparison:

TDM = Current Price (28th Oct 09): RM1.56 / 2.80 = 0.55

THPLANT = Current Price (28th Oct 09): RM1.56 / 0.86 = 1.81

TDM is undervalue.

Round 7 Comparison Result: THPLANT vs TDM –> 2:5

8. Operating Cash Flow / Operating Profit comparison:

TDM: Net Cash generated from operating activities: 74,238

THPLANT: Net Cash generated from operating activities: 204,208

TDM = 74,238 / 100,300 = 0.74

THPLANT = 204,208 / 83,354 = 2.45 > 1

THPLANT definitely deserved a point here.

Round 8 Comparison Result: THPLANT vs TDM –> 3:5

9. PE

TDM:

Based on 2008 EPS = 1.56/0.4537 = 3.4x, however, oil palm industrial is not performing good in the first two quarter for this year.

Current 2 quarters accumulated PE for TDM is 0.0606 (EPS Growth 122% from Q1 to Q2). I’m confidence that it will achieve better EPS in the next 2 Q.

Let’s say TDM is able to double its EPS to 0.12 in year end, its PE will be 1.56/0.12 = 13x. 

THPLANT:

Based on 2008 EPS = 1.56/0.42 = 3.7x.

Current 2 quarters accumulated PE for TDM is 0.0378 (EPS Growth 19.77% from Q1 to Q2).

Let’s say THPLANT is able to double its EPS to 0.0756 in year end, its PE will be 1.56/0.0756 = 20x.

Round 9 Comparison Result: THPLANT vs TDM –> 3:6

Based on the comparison above, TDM is having a better fundamental compared with THPLANT.

Which means that now, i shall focus on TDM. When shall we buy in…that will be on technical analyst, in part 3. Stay tuned!!!