Indofood Agri Resources (IndoAgri)

[BlueKelah]

this means controlling interests do not own the complete company and some other person/company has almost half the non-controlling shares?

i am not an accountant so not sure if i am completely factual. Someone pls correct me if need be.

consider A purchases 80% of B, so B is now a subsidiary hence balance sheets should be consolidated. The 20% of B which is not owned by A should fall under non-controlling interests so that ultimately numbers must balance.

So desu ne.. thanks for clarifying guys

anyone care to share what is good price to buy in? Previous lows during GFC was 40cent. Someone suggested less than $1 for margin of safety... Currently i understand it is just beginning of a long commodity downturn.

I would like to continue my dreams of being a plantation master

<vested>

[Stockerman]

i think it might reach 50 cents faster than expectations

Just need to be patient..

this means controlling interests do not own the complete company and some other person/company has almost half the non-controlling shares?

i am not an accountant so not sure if i am completely factual. Someone pls correct me if need be.

consider A purchases 80% of B, so B is now a subsidiary hence balance sheets should be consolidated. The 20% of B which is not owned by A should fall under non-controlling interests so that ultimately numbers must balance.

So desu ne.. thanks for clarifying guys

anyone care to share what is good price to buy in? Previous lows during GFC was 40cent. Someone suggested less than $1 for margin of safety... Currently i understand it is just beginning of a long commodity downturn.

I would like to continue my dreams of being a plantation master

<vested>

[BlueKelah]

thanks stockerman 50 cents it is then i will be waiting...

Haha learned a lesson from first resources when i started my plantation master dream.... Good company under lawsuit last time and went down to i think 80-90 cents i sold despite good valuation and business profits... now is up so much. BIG FISH GOT AWAY...

[zerobeta]

used to analyze this company a few months back...

here's the investment thesis:
-current price of mature palm oil plantation is about USD 10-15k/ha
-current price of raw plantation land is about USD 500/ha
-the company owns about 250k ha of mature palm oil plantation and a further 115k ha of unplanted land bank, which means the current asset of the company's palm oil plantation alone, after deducting its net debts, already worth some USD 2.5 bln
-the company's current market cap is about USD 900 mln (55% discount to NAV))
-so we are looking at one of the world's largest palm oil planters at a grossly discounted price

and want to know what other assets that you can get for free?
1) 40k ha of rubber, sugar tea, and cocoa plantations
2) 21 palm oil mills, 5 CPO refinery facilities, 7 rubber factories, 2 sugar factory, 1 cocoa factory, 1 tea factory
3) 2 palm oil seed facilities that can produce about 30 mln seeds per year, enough to cover the whole palm oil planting activity in Indonesia

still not enough?
the company also owns Bimoli cooking oil brand which grabs almost half of Indonesia cooking oil market.... you can get this cash cow business with low R&D and capex requirements for free too....

it's up to you to make the call... be wise...

[kelvesy]

I am not well-versed at commodities at all, may I ask, why are agricultural commodities are suffering for so long?

[BlueKelah]

I am not well-versed at commodities at all, may I ask, why are agricultural commodities are suffering for so long?

they are not suffering at all. at current price its about fairly valued. Previously there was a big BOOM and bubbly commodity prices. If global economy continues to worsen, you can expect a general continued decline even from todays supposedly "low" prices which are not historically in the low range yet.

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rickytj : a few reasons why this counter is down and your investment thesis missed out some critical points.

Few years back they made shareholders lose quite a bit of value by listing their main cash cow palm oil subsidiary in Indonesian stock exchange. dunno how to explain but if you look at the reports you can see it resulted in a substantial hit to their profits. This showed that the management didnt care much about shareholders and did something stupid that didnt add value.

If you look at profit and margins they are both down down downtrend. Even Bimoli is earning less and less.

PE is skyhigh due to falling profits. compared to its peers the profits are really quite bad. Thats why firstres for example is still doing well.

Using NAV to value Indoagri a plantation company is not that accurate also. Of course they have huge land and that gives them high NAV. but in a downturn or bankruptcy who is gonna buy your AGRICULTURAL LAND. Cannot even rent it out! this also masks the fact that their HUGE DEBT has been growing. latest is about 74.42% debt to market cap ratio.

and with indonesia interest rate going up that debt is gonna generate more interest payment which will eat into future profits.

and as i said previously, palm oil is now only about historical median level. so in the future can go both ways equal chance.

so both growth wise and income wise this stock is not performing for now. the only shining light worth to consider investing in this stock is the diversification in sugar and other plantations which I really like. But as said before, any cash cow the management may do something stupid like sell it off for cheap and make their other company make money

[zerobeta]

I am not well-versed at commodities at all, may I ask, why are agricultural commodities are suffering for so long?

demand vs supply... when the world's biggest consumer of agricultural products slows down by over 300 bps, inventories will start piling up...

when the price of all commodities skyrocketed during the years preceding the 2008 crises, farmers were very bullish and planted a lot of trees... they were wrong... now after 4 years of planting, fruits are ready to be harvested... but few are there to absorb the new supplies...

inventories are now around all-time record high but they've been slowly normalizing although this hardly can push the price back to 2007 level again...

a lot of financial analysts from the big banks like to utter the famous words "end of commodity super-cycle"... so i think the outlook is just not exciting at the moment...

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@BlueKelah

interesting point of view about listing its subsidiary in IDX... but can you enlighten me more on how does it impact the company's profitability? because that cash cow subsidiary, which I believe you were referring to Salim Ivomas, is also not doing well itself... even Salim Subsidiary, London Sumatra, which has been listed decades ago is also suffering at the moment....

i think declining profitability and margin have more to do with their farm management practices and quality of their land than with the listing issue... take a look at their yields for example, the productivity of their trees is just very low... its 1 ha of land probably can produce only up to 16-17 tons of FFB, while First Resources and Astra Agro can produce up to 22-23 tons of FFB per ha... so clearly their practices are inferior to FR and Astra Agro... and this has been going on for years....

i think using NAV is still appropriate for an asset heavy company like IFAR... you are true that during downturn or bankruptcy their assets probably have to be sold at a discount... but that's because they are in need of liquidity... these assets are commodities, they will still be the same no matter whether they are bankrupt or not which means the discount won't be that huge... not to mention plantation land price in Indo has been going up 15-20% in past few years, and combined that with the land moratorium regulation the Indo gov just released recently.... which should drive the land price even higher....

but i still like to know more about the management incentives for holding IFAR... i agree with you that the management is ultimately the one piece that determines the fate and hence share price of the company... Salim family has so many businesses, IFAR can just be a supporting company for its Indofood business....

[mkmk]

Financial Statements: http://infopub.sgx.com/FileOpen/IFAR3Q13...eID=261726

Press Release: http://infopub.sgx.com/FileOpen/IFAR3Q13...eID=261727

Presentation Slides: http://infopub.sgx.com/FileOpen/IFAR3Q13...eID=261728

IndoAgri posts 3Q13 Revenue of Rp3.1 trillion (S$380 million)1 with attributable profit of Rp123 billion (S$15 million)
HIGHLIGHTS:
- Revenue declined 13% yoy in 3Q13 mainly due to lower selling prices of key plantation crops and lower bulk oil and copra-based product sales
- EBITDA down 15% yoy in 3Q13 on lower selling prices and rising production cost, and partly offset by maiden profit contribution from CMAA
- Attributable profit fell 52% yoy to Rp123 billion (S$15 million)
- Established a S$500 million EMTN Programme in end September 2013

(not vested)

[muns]

Does anyone know the reason why Indofood (Plantations are inclusive of SIMP and Lonsum) FFB yields are considerably low, given that their average age profile are seemingly in the prime?

It's significantly lower than their peers in the SEA region for a plantation with planted area of such a size. And its also not a one off event, it has been getting such below average yield for the past 4-5 years!

In my opinion, P/B isn't a very good metric to value such plantation companies as their FV Gains differ very widely even throughout the region and they aren't in the business of selling more plantation land (Rather they want to buy, but it has been getting very pricy in Peninsula Msia, things are starting to heat up in Kalimantan and East Malaysia.
________________________________________________________
Finding the Value in a Speculative World
http://www.valueinvestasia.com

[BlueKelah]

Does anyone know the reason why Indofood (Plantations are inclusive of SIMP and Lonsum) FFB yields are considerably low, given that their average age profile are seemingly in the prime?

It's significantly lower than their peers in the SEA region for a plantation with planted area of such a size. And its also not a one off event, it has been getting such below average yield for the past 4-5 years!

In my opinion, P/B isn't a very good metric to value such plantation companies as their FV Gains differ very widely even throughout the region and they aren't in the business of selling more plantation land (Rather they want to buy, but it has been getting very pricy in Peninsula Msia, things are starting to heat up in Kalimantan and East Malaysia.
________________________________________________________
Finding the Value in a Speculative World
http://www.valueinvestasia.com

read the post above yours. Just poor farm practice such as using less fertiliser, not enough pest control, planting trees too close together, etc...