TDM Berhad

Being a plantation stock, its a wonder how this company has managed to stay in the low PER range. With commodities staging a sort of comeback led by oil, it's only a matter of time before palm oil will follow suit, thence plantation stocks.


Companies like IOICORP enjoy a premium in the prices due to their size and also future growth. TDM with a much smaller but matured plantation are now reaping the benefits of the labour and the timing couldn't be better with expectations of Crude Palm Oil hitting RM3000/tonne in 2010.


TDM also has a venture in health care, running 3 medium-low costs hospitals which is now contributing about 10% of profits for the company. Their smaller venture into poultry farming is profitable but almost insignificant compared to their plantation profits.


While most plantation companies tend to have moderate dividend payouts, TDM with their lower valuations offers some good returns from their dividends. FYE2009 they have declared 4 sens before tax and another 9 sens tax exempt making a total of 12 sens. At the current price of RM1.97 per share, that's a 6% dividend. That's a dividend payout of about 50% based on their FYE2009 EPS of 25.03 sens. Their dividend history only started from FYE2006 onwards.


PER is 7.8x based on FYE2009 EPS of 25.03sens and current price of RM1.97/share. NTA is last reported at RM2.88 per share.


Debt levels are extremely good for both long and short term borrowings. Although their trade payables are on the high side but it has been pared down since last year from RM190 mil to a more moderate RM136 mil. Overall view of their cash flow is steady with RM112 mil cash in banks and RM78 mil in trade receivables. Their deferred taxation accumulated in 2008 is another sore point in their liabilities section, 2009 only see an insignificant increase in that area.


Their monthly production throughout the year are slightly cyclical due to rainfall in and it's at the beginning of the year before picking up again in June and peaking in the final quarter. No wonder their dividend ex-date is in May and they only pay once a year. Their future planning includes planting more acres in Kalimantan, Indonesia as their total plantation land is only 37000 hectares which is all situated in Terenganu. But good news is 95% of their plantation is matured trees.


Overall the company is an attractive counter for the sake of plantation play as they are relatively cheap compared to their peers, small amount of debt compared to their cash levels, attractive dividends and good prospects of increasing CPO yields in the near future.