Would shareholders be better off if TH Plantations sell its assets like Boustead Plantation?

TH Plantations has about 55,000 of planted land compared to Boustead Plantations which has about 70,000 ha.

The shareholders of Boustead have decided that they can derive better value if it was part of KLK rather than operate it on their own.

If you compare the ROE of KLK (shown in green in the chart) over the past 9 years with those of BPlant (shown in black), you can see the economic rational.

When you look at TH ROE over the same period, it is worse than that of  BPlant.

I know TH has its Transformation plan to turn deliver better returns. But wouldn’t it be easier for TH to take the BPlant route and then put the money into better use?

The plantation sector seems to be dependent on size. Look at Sime Plantations and IOI and you will know what I mean.

For more insights into the Bursa plantation sector, go to “How the Malaysian plantation sector performed over the past 10 years”

When I screen for companies, I just don’t look at the performance of a metric at a particular point in time. I also look at how it changes over time.

One way to do this is to look at the trend of the metric and compare it with a reference company that I have found to have good fundamentals. It is a quick and dirty way to judge its fundamentals.

One example is illustrated in the charts for Bursa Malaysia TH Plantation. It shows its ROE and Net income margin trends compared to those of my reference company – KLK.

You can see that while TH Plant performance had improved relative to 2018, the results of the 2 metrics is not going to be as good as KLK. So its fundamentals are not so great.

I think this is a better way to screen for companies than just look at static numbers. Unfortunately most screens don’t display such trends readily.