Those are very detailed comments. Have you spoken to AEP about these matters? |
About investments :
- at KAP they'll build a mill
- the plantation in Bangka is a bit suboptimal in scale. They are searching for a producing plantation (3000-4000ha?) to supplement the one in Bangka, which is quite old as well I guess and need replacement.
- this would create the scale for investing in an extra mill in Bangka.
- apart from these "smaller" investments to be realised by 2026, they're searching for a bigger, new plantation which could absorb up to 70m$. |
 They'd probably say for flexibility. Resolution 12 at the AGM (giving the ability to allot shares) received 8,697,053 votes against.
AEP responded to that with:
"We note that the authorities sought by the Company under resolution 12 are in line with the maximum recommended levels contained within the relevant share capital management guidelines and prevailing voting guidelines of leading corporate governance agencies. The Company only retains these authorities to provide flexibility in the capital management of the Company and would only exercise these authorities if it were considered in the best interests of shareholders.
Following the AGM, the Company's Executive Director has subsequently consulted and engaged with a group of shareholders who voted against the resolution in order to hear their views and better understand their concerns.
The Board is grateful to all shareholders who provided feedback on this resolution. The common theme apparent from the engagement with this group of shareholders was their concern over dilution and that they would prefer not to grant general or annual authorities in respect of changes in equity capital, but instead to review approval when required for specific transactions.
AEP is committed to maintaining an open and constructive dialogue with all of the Company's shareholders and will continue to engage with those shareholders for whom this resolution present concerns."
On my belief that they will make acquisitions, I have five reasons:
1. They say they're trying to make acquisitions: "During the year, the Group made enquiries on acquisition of plantation lands but nothing materialised because of a lack of quality land or because it was excessively priced. The Group, as part of its strategy, will continue to maintain a disciplined strategy in seeking quality plantation land for expansion."
2. They've just spent $87.8 million buying back minority interests. That shows a willingness to spend significant cash. They didn't have to do it, they chose to.
3. They have been spending significant amounts on growth capex. That's why they will soon have eight mills. I think those internal opportunities are becoming more limited.
4. They've sold lots of weak assets. I think the ego in them will not like being smaller.
5. Having bought out the minority interests and sold loss-making assets, they will be making even greater profits and they're going to be piling up cash as long as palm oil prices stay decent. They could just keep it as cash or do some silly thing in Luxembourg, but I think it's reasonable to assume they want to do what they say they want to do: make acquisitions. |
Any idea why they do not cancel the shares but instead put them into Treasury? A bit odd.
Sure, both procedures reduce the share count and cause the net assets to drop just like a dividend leaving the company does, but putting them into Treasury gives them the option of shooting them out again, no doubt at a higher price, if they wish to, whereas cancellation can only be undone by incurring significant legal, accounting and brokerage fees, e.g. as in when new shares have to be created, for example through a subscription offer?
I remember taking taking up a rights issue at a little over a £1 in the 1980s or early 90s when Mdm Lim first got control, after which they went down to 29p. A little history!
The company has a recent habit (last 5 years?) of being run slightly sub-optimally, so they have had a long time to do inorganic growth, not a case of the asking price was always too unrealistic? May I ask what makes you think they will do that any time soon? Maintenance capex, yes; growth capex, you have got to be kidding (apart from tidying up the minority). |
AEP has spent considerable amounts of money building mills. They've just finished the 7th mill, at a cost of $22.5M.
The annual results say the 8th mill "with a planned capacity of 45 mt/hr will be sufficient to process all the crops from KAP plantation. The mill is projected to start in the first half of 2024 at a cost $15.3 million."
These are considerable investments. I think AEP is probably reaching the point of new mills not being necessary or desirable.
At that point, cash build - in the absence of distributions or acquisitions - would significantly increase.
I think that's why they say they're looking for acquisitions. |
I have had my hand forced by the BoD's actions and have had to buy this in the last couple of days (this is the last company in the world I wanted to buy shares in - the lowly balanced risk rating is enough to make any risk junkie recoil in horror): the share price underperformance with MPE is just so bad - I have been a forced buyer. Thank you for your understanding. |
But they wouldn't have the votes to do it at a bad price.
That's why I strongly opposed those arguing for an aggressive buyback/tender. We don't want votes to be further concentrated in the hands of the heirs of Madam Kim. At 52% they won't be able to screw us. |
Sadly, I think TBTT is correct. The board must have been worried when the share hit 770p, after the measly div and cancellation of the share buyback, the subsequent 12% fall has no doubt has pleased them no end.
The share buyback never got off the ground and in point of fact, at one stage MPE we’re buying back more shares in a day than AEP we’re in a month. Even after paying an increased div their shares are now £1.60 above AEP. I’m afraid the minority shareholders will count for nothing when the company is taken private, the cash pile will be of no benefit to us at all. Strangely though, turnover seems to have perked up recently. |
Well, I figure the board can call this mission accomplished - the share price has been successfully suppressed. The cancellation of the share buyback (and the absurd reason given for it) speaks volumes.
Of course the board have an unspoken reason for behaving in this way. And, as far as I can see, that reason must be that they are engineering a low-price insider buyout of the minority shareholders, which could be financed entirely by the company's own cash pile.
I assume that we have to wait for the final settlement of Madame Lin's will to find out more. I don't know how long that will take. |
Sorry, I meant $153M cash and cash equivalents as listed in the annual results.
Redtrend used $153M net cash and I repeated it without thinking.
Might as well add the $10M in Lux to get $238M net current assets even if they aren't readily accessible.
I agree that it's very annoying. |
How do you come to $153m net cash?
I've got : 153 + 14 (short term) + 10 (Lux funds) = $177m net cash, or about 3,5£/share.
Especially the $10 Luxembourg investment frustrates me : why not return the clearly excess $10m cash to the owners and let them decids where to invest their cash??? |
But it isn't just the net cash of $153M. Net current assets are $228M.
Net current assets are 65% of the market cap and there's no debt. It's ludicrous and everyone can see it's ludicrous.
Shell "targets the distribution of 30-40% of cash flow from operations through the cycle to shareholders".
Really all you have to do is look at MPE. Their dividend is 2.65x AEP's and their net current assets minus debt is about zero. AND they're buying back shares. |
Putting in place a dividend policy and being in line with more generous side of commodity/ mining companies dividend policies would suggest otherwise: 25% of annual retained profit.
"In determining the level of dividends to be paid to our shareholders, the Board has taken a balanced approach to the requirement of funds in the Company for expansion in planted area as well acquisitions of land or plantations, but at the same time cognisant of shareholders' wishes to have dividends as a form of income. In light of the results achieved in the year, the Board has declared a final dividend of 15.0 cts per share, in line with our reporting currency, in respect of the year up to 31 December 2023. With an interim dividend of 15cts per share already paid, the total dividend declared for the year ended 31 December 2023 will be 30.0 cts (2022: 25.0 cts), equivalent to approximately 25% of the retained profits attributable to the Group for the year ended 31 December 2023. Going forward the Company has adopted a policy of declaring at least 25% of the retained profits attributed to the Group annually."
You also have to bear in mind the $60M purchase of the Indonesian non-controlling interests only occurred in Nov-2023 so significant % of revenues and profits are attributable to this. Of the $65m Net Profit in 2023, $9.5m is attributable to non-controlling interests. Going forward this will no longer be the case, so in terms of dividends and like for like comparison, we will have 25% dividend policy of a larger share of net profit.
The non-controlling interests are now pretty much nil. If you jump to Note 28 of Report and breakdown of entities, Malaysia entity still has 45% non-control interest and 1 of the Indonesian entities " PT Bangka Malindo Lestari" has 5% non-control interest.
I do of course agree having a Net Cash pile of $153m is far too high / conservative and is idle that should be paid to shareholders. But at least we've gone from nil dividend, to a 3-4% dividend and an actual dividend policy, that now with non-controlling interests bought out, should generate higher div yield on like-for-like basis.
Would also hope in time the 7th mill (HPP, North Sumatera) completed Q4 2023 at $22.5M will also add revenues and profits. There's then 8th mill they plan to build in Kalimantan with EIA awaiting approval. |
The estate of Madam Kim isn't finalised. The application for probate is in progress. There are media reports that there are - or at least were - disputes over the will.
That might be part of the problem here. |
Cancelling share buyback suggests they might take private.
It’s always been illiquid so why are they suddenly surprised with the low share buyback volumes? |
That's also what I was thinking.
They want to buy it out and certainly don't want to pay more than the valuation of other western plantations.
If they buy back shares up to the point that the shares are similarly valued as other western plantation groups, they won't be able to pay a premium so taking it private would be difficult.
A take out at similar valuation as the others is fine by me, by the way. |
The question is: Why?
What's the motivation? Is it empire building? Are they accountants who are terrified of going bankrupt? Is it a plot to eventually take it private on the cheap?
They're not stupid. They'll know what they're doing isn't normal and that the shares are ludicrously undervalued. |
Concur Tiger,nothing much in release to encourage buying the shares, |
TBTT, I completely agree on all points! |
Results out.
They're in line with my expectations and reflect a solid profitable business with a large cash pile. Many of the board's inwards-facing actions are sensible and measured.
So far, so good.
But, unfortunately, I don't think the board "get" being a PLC at all. The dividend is measly under the circumstances, and instead of expanding the share buyback, they are going to halt it, complaining that it has not netted enough shares. (Hint: try putting your "buy" price up - nobody is going to sell whilst the shares are so obviously undervalued compared to AEP's peers!). A secondary listing in a better stock market would be most welcome (Singapore?).
Additionally, I have to complain about the stress test the board set for the business - the scenario they envisage is basically Armageddon, and you can't stress test for the end of the world - far too many variables! |
MKH Palm Oil(issue price 62 sen)is set to debut on Bursa Malaysia on 30th April … it was oversubscribed 8.4 times, it will be interesting to see how the market receives it. MKH has around 18,000 ha in East Kalimantan, I believe the pe is 20 and projected yield 4-5%. I have no doubt it will show just how absurdly cheap AEP is. I was pleased to buy a few more shares at 708p before the recent uptick.
Let’s hope the dividend is increased but what would really help the price would be for the management to seek a listing in Singapore. |
Indonesia raised rates to 6.25% to defend the Rupiah which, along with other asian currencies, has been weakening significantly against the dollar. |
This is so deeply undervalued it's hard to get exuberant here! EV is tiny compared to its direct peers. It "should" be trading at roughly double the current share price.
Hoping for a dividend uplift, a further share buyback, and maybe a plan to list on another stock exchange where it will be valued more appropriately. |
Sentiment is not exactly "exuberant" over here ;-) |
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