Hello October

G’day everyone. This shall be my very first posting for the month of October. Many have considered October as ‘month that is filled with bad omens’ since this very month has witnessed numerous historical crashes in stock markets.

Nevertheless, I’m keen to look at one particular long-established company, Hap Seng Plantations Holdings (the Company  is engaged in cultivation of oil palm and processing of fresh fruit bunches carried out in Malaysia).

It appears to be trading in range bound, with its recent marginal uptrend in its 20D EMA. Whether the stock’s momentum will continue, it is dependent on whether it can break the next key resistance point at RM2.73

Hapl_TA.png

There have been pockets of major activities in its trading volume, which may be potentially attributable to recent accumulation in the shares of the Company by Lembaga Tabung Haji:

HAPL_Insiders.png

As shown below, Hap Seng Plantations tends to be ‘less reactive’ to the movements of the CPO. As such, we would expect a generally muted correlation between the Company and CPO.

Hapl vs CPO (multiple graph.png

Strictly For Educational / Illustrative Purposes Only

Based on a simple regression analysis (with R-square at 0.38) between the share price of Hap Seng Plantations and CPO, the current share price (RM2.67) of Hap Seng Plantations appears to be fairly valued if compared to its forecasted value of RM2.61 (with a 95%-confidence band of RM2.14 – RM3.07)

HapL_Oct17.png

We also run a regression analysis between P/E ratio of Hap Seng Plantations and CPO. Although the statistical relationship appears weak, the current P/E of Hap Seng Plantations of 14.17x is not unreasonable if compared to the forecasted P/E of 15.68x (with a 95%-confidence band of 8.3x-23.1x).

HAPL_PER vs forecast.png

As shown in the frequency distribution of the Company’s P/E, the current P/E ratio of the Company appears to be not unreasonable as it is below the mean PE (since 31 Dec 2008).

HAPL_normalitytestPER.png

The above analysis is a simple high-level desktop analysis. One should conduct further research and background study of the Company.

DISCLAIMER: THIS IS A PERSONAL BLOG AND SHALL NOT BE RELIED IN WHATSOEVER MANNER BY ANYONE. ALL ARTICLES CONTAINED IN THIS SITE ARE STRICTLY FOR INFORMATION AND ILLUSTRATIVE PURPOSES ONLY AND DOES NOT PURPORT TO SHOW ACTUAL RESULTS. IT IS NOT, AND SHOULD NOT BE REGARDED AS INVESTMENT ADVICE OR AS A RECOMMENDATION REGARDING ANY PARTICULAR SECURITY OR COURSE OF ACTION. SOURCES USED IN THIS SITE HAVE NOT BEEN INDEPENDENTLY VERIFIED FOR ACCURACY, COMPLETENESS AND TIMELINESS. YOU SHOULD SEEK INDEPENDENT AND PROFESSIONAL INVESTMENT ADVICE IN REGARD TO YOUR INVESTMENT DECISIONS. THE AUTHOR MAY HOLD POSITIONS IN THE SECURITIES MENTIONED IN THE ARTICLES.

Statistics & CPO

I am NOT a Crude Palm Oil (CPO) expert. I do not profess to be one too. I am more interested in the statistical element of CPO prices. 

Commodities like CPO are dependent on cycles (seasonal factors). In fact, there are weather considerations that will impact on CPO prices. The following graph shows the historical CPO price since November 2007, with a historical median CPO price of RM2,585.

CPO_1.png

As shown below, it is observed that there are some “seasonal weakness” in the CPO prices (mainly in Q2-Q3), middle of the year):Presentation1.png

The following table shows that on average (since Nov 2007), there is a probability that CPO price will tend to fall below the median price of RM2,585 in the months of Aug, Sep, Oct and Nov:

CPO_2

The following graph shows the estimated CPO price (by month) by adding the average differential (between CPO Price and CPO median) with historical median CPO price of RM2,585. Strictly For Educational and Illustrative Purposes Only

CPO_3

One may argue that trading in commodity or commodity-related companies should be based on seasonal factors and cycles. If that argument holds and assuming that the above high-level statistical analysis works out as planned, I may personally consider the months of October-November as a possible (not a certainty) entry point for trading CPO or palm oil-related stocks. It is important to note that there are NUMEROUS factors that impact on CPO prices. Statistics may not work at times.

DISCLAIMER: THIS IS A PERSONAL BLOG AND SHALL NOT BE RELIED IN WHATSOEVER MANNER BY ANYONE. ALL ARTICLES CONTAINED IN THIS SITE ARE STRICTLY FOR INFORMATION AND ILLUSTRATIVE PURPOSES ONLY AND DOES NOT PURPORT TO SHOW ACTUAL RESULTS. IT IS NOT, AND SHOULD NOT BE REGARDED AS INVESTMENT ADVICE OR AS A RECOMMENDATION REGARDING ANY PARTICULAR SECURITY OR COURSE OF ACTION. SOURCES USED IN THIS SITE HAVE NOT BEEN INDEPENDENTLY VERIFIED FOR ACCURACY, COMPLETENESS AND TIMELINESS. YOU SHOULD SEEK INDEPENDENT AND PROFESSIONAL INVESTMENT ADVICE IN REGARD TO YOUR INVESTMENT DECISIONS. THE AUTHOR MAY HOLD POSITIONS IN THE SECURITIES MENTIONED IN THE ARTICLES.

Proxy To Palm Oil?

Since 1979, CB Industrial Product Holdings Bhd has been equipping palm oil mills in Malaysia and around the world with high quality processing equipment and replacement parts. Over the years, the products have gained a reputation in the industry for excellent workmanship, consistent high quality and unsurpassed reliability.
As a result, the products enjoy a healthy market share in Malaysia as well as foreign markets including Indonesia, Papua New Guinea, West Africa, and Central and South America. Today, CBIP much more than just an equipment and parts manufacturer. Expanding on in-depth industry knowledge, experience and expertise in this area, CBIP successfully established as a full-fledged turnkey contractor for palm oil mills.

Continue reading “Proxy To Palm Oil?”

Finding Bottom For Plantation Stocks

We look at 6 plantation stocks that are currently trading on Bursa: IOI, KLK, Genting Plantation, Hap Seng Plantation, TSH Resources and CBIP. In this analysis, we will try to explore how movements in CPO prices affect the share prices of these stocks using a simple regression analysis. We use data since Jan 2015 till date.

The results are as follows:

palm oil

Key Observations:

  1. The statistical relationships appear significant for IOI, KLK and Genting Plantation. Based on the derived formula, these counters are currently trading close to their predicted values.
  2. For TSH, Hap Seng Plantation and CBIP, the relationships appear weak, suggesting non-reliable statistical properties. These three counters exhibit negative marginal correlation with the movement of CPO
  3. We also set the 95% upper bound and lower bound for these stocks, setting projected resistance and support price range.
  4. Nothing substitutes for a detailed fundamental analysis, this is only a quick-and-easy analysis.
  5. Further analysis is required – including a longer time frame of data

 

DISCLAIMER: THIS SITE IS FOR INFORMATION AND ILLUSTRATIVE PURPOSES ONLY AND DOES NOT PURPORT TO SHOW ACTUAL RESULTS. IT IS NOT, AND SHOULD NOT BE REGARDED AS INVESTMENT ADVICE OR AS A RECOMMENDATION REGARDING ANY PARTICULAR SECURITY OR COURSE OF ACTION.  SOURCES USED IN THIS SITE HAVE NOT BEEN INDEPENDENTLY VERIFIED FOR ACCURACY. YOU SHOULD SEEK INDEPENDENT AND PROFESSIONAL INVESTMENT ADVICE IN REGARD TO YOUR INVESTMENT DECISIONS.