Monday, March 22, 2010

Palm Oil Stocks Valuation Multiples - Wilmar, Golden Agri, Indo Agri, First Res, Kencana Agri

Based on the latest FY 2009 earnings and balance sheets statements, here are the relative valuation multiples for the 5 SGX listed palm oil stocks. The relative valuation is based on 2 key multiples: the price/earnings ratio and the price/book ratio

Wilmar IntGolden AgriIndo AgriFirst ResKencana Agri
Price per Share (SGD)6.55 0.56 2.19 1.15 0.295
Price/Earnings Ratio15.58 8.01 9.98 9.30 12.60
Price/Book Ratio2.69 0.88 1.58 1.95 1.47

As can be seen, Wilmar has the highest P/E ratio. This is despite the fact that it is not the most profitable of all the companies. However, it is definitely the largest of all the companies. Its size and reputation definitely contributes to the fact that its P/E is the highest of all the 5 companies. In contrast, Golden Agri has the lowest valuation of all the 5 companies, and this is in line with its poor profitability.

Meanwhile, taking into consideration the profitability rankings, it seems that First Resources looks very reasonably valued on the basis of its P/E ratio, relative to its peers.

Based on the Price/Book ratio, Wilmar is again the most expensive. Golden Agri is the cheapest. However, this time First resources is not particularly cheap compared to the others. It has a high P/B, that partly reflects its high ROE.

Roundup: Based on all the profitability numbers and the valuation numbers, it seems that First Resources is the most reasonable buy amongst all the 5 SGX listed palm oil stocks, purely based on a financial analysis.

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