In March, I have posted on UMcca being a laggard amongst the plantation stocks (go here). The stock did not rise very much; just about 30% from RM3.50/60 to RM5.90 as at yesterday.
Yesterday, the company announced its results for QE31/7/2007, which shows a healthy jump in both topline & bottomline. Net profit has increased by 34% q-o-q or 160% y-o-y to RM17.1 million while turnover has jumped by 54% q-o-q or 80% y-o-y to RM46.6 million. While the company has attributed some of the improvement to higher investment income & higher contribution from associates, I believe the bulk of the improved net profit flowed directly from higher contribution from its plantation business. In a recent report, TA Securities opined that UMcca "had entered a virtuous cycle of multi-year double-digit earnings growth... due to a significant increase of landbank reaching maturity as well as progressive rise in FFB yield, thanks to a favorable palm tree age profile".
TA Securities has selected UMcca as its top pick for the plantation sector with a target price of RM6.78. This target is the sum of the value assigned to UMcca's plantation business (about RM6.78 per share) and the value of its stake in the listed Pacmas as well as its cash in hand. S&P, which used the same method of valuation, has assigned a much lower value of RM3.66 per share for the plantation business & thus arrived a target price of RM5.70 for the same stock.
Technical Outlook
The stock is still in an uptrend line, with support at RM4.90-5.00. Its horizontal supports are at RM5.30 & RM5.55 while its resistances are at RM5.90 & RM6.15.
Chart : UMcca's weekly chart as at September 11 (courtesy of Quickcharts)
Conclusion
Based on its good financial performance, UMcca is still a good buy for the medium-term. Good entry level will be about RM5.50-60.
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