Some stocks that I think could be quite potential
Sarawak Oil Palm (RM 5.85 6 Jan 2012)
Chris Eng - Director of Research
When commodity prices are on the uptrend, all plantation stocks will benefit from higher crude palm oil prices. But Engs says Sarawak Oil Palms Bhd (SOP) is one company that could beat its peers in 2012 because 77% of its trees are still below 10 years of age.
Hence, Eng says there is still plenty of room for growth for the company.
Meanwhile, CPO prices have been also been estimated by OSK Research to be at RM3,000 per tonne this year and this could mean higher profits for SOP, whose production costs are lower than its peers in Sarawak.
SOP's production cost is about RM1,300 per tonne, according to Eng, which is lower than that of it Sarawakian peers, which is RM1,400 per tonne.
Another catalyst which could help SOP become a dark-house stock of 2012 is the building of its refinery in Sarawak.
This, says Eng, will help SOP ease any bottlenecks it might have in terms of demand for its CPO.
KLCC Property Holdings (RM 3.32 6 Jan 2012)
Gan Eng Peng - Head of Equities
HwangDBS Investment Management
Gan chose KLCC Property Holdings because of several potential catalysts. The first would be if the group decides to form a REIT structure. With the group's valuable assets - including 60% in Suria KLCC, 50% in Petronas Twin Towers and 100% in Menara ExxonMobil - a REIT structure could help "flush out values" imbedded in the company, says Gan.
Also, the group recently expanded its Suria KLCC mall by 15% and fully owns the extension, which could contribute a 20% to 30% earnings boost for the group.
KLCCP's net asset value is between RM6 billion and RM7 billion, says Gan, but the stock currently trades at about a 50% discount to book value.
While KLCCP's stock price has not seen much growth over the last five years, the group could benefit as it turns into a net rental collector from a net builder, with the possibility that it may declare a higher dividend rate going forward.
This could be poosible, says Gan as both the Suria KLCC mall and the Petronas Twin Towers offices are now fully tenanted.
"These catalysts could overcome market perception towards the stock," he concludes.
Jaya Tiasa Holdings Bhd (RM 7.02 6 Jan 2012)
Yeoh Keat Seng - Fund Manager
Kumpulan Sentiasa Cemerlang
The timber-turned-plantation stock darling went up by 46.4% last year, but has further upside potential, according to Yeoh Keat Seng of Kumpulan Sentiasa Cemerlang, with its oil palm trees having the "best growth profile" among plantation companies.
"I am projecting a 2.7 times increase in its three-year fresh fruit bunches (FFB) production growth towards financial year ending April 2014," says Yeoh, adding that the stock's current valuation of about 10 times forward earnings (consensus 12.2 times FY2012 ending April 30 earnings; 10.5 times FY2013 ending April 30) looks cheap.
By comparison, major plantation stocks such as IOI Corp Bhd and Kuala Lumpur Kepong Bhd are trading at over 16 times and 17 times forward earnings, respectively.
"I would prefer looking at those with strong FFB growth rather those that rely on higher CPO prices," says Yeoh.
With growing contribution from the plantation segment, Jaya Tiasa's six months net profit ended Oct 31, 2011, rose 84.8% to RM97.1 million. During the period, plantations contributed 59% to group's pre-tax profit of RM142.4 million.
Besides the strong growth profile of its existing oil palm trees, which are all in Sarawak, Yeoh says Jaya Tiasa's management is looking at expanding its plantation landbank in the state, and thus, potential for bigger growth pipeline. The company's total plantable area for oil palm is now 70,900ha.