United Plantations Bhd (UP), one of Malaysia's oldest plantation companies, has impressed shareholders with its generous and consistent dividend payouts over the past 13 years.
This well-managed and highly efficient oil extraction rate (OER) pure plantation group, which was made a component stock of the KLSE Composite Index in November last year, has all the right ingredients to continue reporting a good set of results this year particularly with the strengthening of the crude palm oil (CPO) price, currently at above RM1,600 per tonne.
Since January 1990, UP has without fail paid gross dividends, ranging from a minimum 5 sen to 35 sen. UP executive director Martin Bek-Nielsen says the group has paid total dividends amounting to RM291mil over the 13-year period.
Its highest gross dividend so far of 35 sen per share was during the 1998 boom when the CPO price exceeded RM2,500 per tonne owing to lower global production resulting from the El Nino phenomenon. And even when the CPO price plunged to RM700 per tonne, the group still paid 27.8 sen per share dividend in 2001.
An investor who had bought one lot of UP shares in January 1990 would have been accumulated dividends of RM2,840 as of end-2002.
One lot of UP shares bought at RM4.52 apiece 1990 was worth RM7,080 (inclusive of total dividends) as of Dec 31 last year.
The investor that held on to the shares at the end of last year would have made a net gain of RM2,560.
In terms of financial results, the pure plantation group's pre-tax profit has doubled to RM32mil for the year ended Dec 31 last year, from RM15.9mil in 1990. During the 13-year period, turnover also jumped to RM223mil from RM122mil.
UP was started in 1906 by a group of Danes, led by Aage Westenhoiz, an artillery officer and civil engineer, trekking through the jungles of Malaya in search of land for rubber cultivation. Sailing up the Bernam river in Perak, they found 2,000 acres of land in Teluk Intan, which they named Jendarata Rubber Estate.
Through the years the group expanded its land-bank and diversified into oil palm cultivation. And in 1966, the estates were merged into a company known as United Plantations Bhd.
Three years later, it became one of the earliest plantation firms to list on the KLSE with paid-up capital of RM32.35mil.
With senior executive director Tan Sri Borge Bek Nielsen at the helm, UP boasts solid financial and productivity track record. In 1982, in response to Malaysia's New Economic Policy which limited foreign shareholding in plantation companies to 30%, the Danes had to relinquish their majority control to Kumpulan Fima Bhd, while retaining their collective 25% stake in the company.
However, following a management buyout at Kumpulan Fima in 1991, the Danish shareholders under the leadership of Nielsen and specialist fats group, Aarhus Oliefabrik, took over the majority stake in what is now deemed to be the first case of “reverse Malaysianisation”.
The group's paid-up capital now stands at RM151.5mil but will increase to RM208mil following UP's acquisition of another plantation company, United International Enterprises (M) Bhd (UIEM). When the merger of UP and UIEM is completed, the group will have an enlarged land-bank of about 100,000 acres.
Martin Bek Nielsen told StarBiz: “We strive to be recognised as second to none within the plantation industry, producing a high quality product, always focusing on the sustainability of our practices, our employees' welfare and profit to our shareholders.”
In its recent research note, Thong & Kay Hian Securities Sdn Bhd described UP as being often overlooked by investors.
The stockbroking house believes UP's recent acquisition of UIEM would boost the plantation group's size and competitiveness and make it a prominent player in the plantations sector.
Another analyst is also impressed with UP's efficiently managed, ecologically friendly and integrated estates. In addition, the close promixity of the palm oil mill and refinery to the estates further enhances efficiencies while years of research not only into oil but coconut, banana and other commercial plants as well are yielding positive results to the extent that the R&D department itself functions as a profit centre.
Both stockbroking houses have recommended a “buy'' on UP with its valuations remaining attractive.