Saturday, December 3

Delloyd Ventures to see upside in 2011

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KUCHING: Supplier of automobile components and accessories to Proton and Perodua in Malaysia, Delloyd Ventures Bhd (Delloyd Ventures) is expected to see bullish earnings this year given that its automobile and plantation divisions are doing well in Indonesia.

REMAIN STABLE: UOBKayHian says despite expected softer CPO prices in 2012, its net profit is expected to be stable, cushioned by higher production volume.

The company also supplies automobile components and accessories to domestic automobile makers and foreign original equipment manufacturer (OEM) customers such as PT Toyota Motor Manufacturing and PT Honda (Indonesia) and General Motors (India and Thailand).

While that contributed 63 per cent to 2010 pre-tax profit, 31 per cent came from its plantation division.

According to research firm UOB Kay Hian (Malaysia) Holdings Sdn Bhd (UOBKayHian), the group’s automobile division was expected to grow by two to three per cent, in line with the domestic total industry volume (TIV). This gets a lift from its Indonesian unit with higher bus sales in the country.

On the financial front, the automobile division contributed 75 per cent to the group’s revenue in 2010 versus 77 per cent in 2009. Consequently, its automobile revenue rose a strong 34 per cent in 2010 to RM298 million, which was also propelled by growth from its Indonesian unit.

In Indonesia, it manufactures and assembles 18-metre high-floored articulated compressed natural gas (CNG) buses under the ‘Komodo’ brand for the bus rapid transit system in Jakarta. In 2010, it delivered 29 units.

“We understand the Jakarta regulator intends to open for tender 48 new buses this year and 50 units for 2012. Given Delloyd Ventures’ healthy track record, we expect the company to secure orders of at least 40 units this year, with an average selling price of about RM1.2 million,” the research firm said.

While the company’s automobile division contributed 71 per cent of operating earnings in 2010, it was being expected that contribution from this division to be diluted by strong growth in its plantation division.

The group’s plantation earnings from its Indonesia estate were expected to grow significantly this year due to higher fresh fruit bunch (FFB) yield from increasingly maturing plants and high crude palm oil (CPO) prices.

Against backdrop of strong CPO prices and increasing FFB production,  Delloyd Ventures registered a 25 per cent growth in its plantation revenue in 2010. It was able to increase FFB production by more than six per cent as a result of an increasing number of maturing plants.

This mainly come from a 14 per cent year-on-year (y-o-y) jump in production from its 14,411 hectare Indonesian estate while production from its 1,449 hectare Malaysian estate contracted 13 per cent in 2010. The research firm estimated its CPO average selling price could have increased by 15 per cent y-o-y in 2010.

“With more plants maturing from its Indonesia estate, we expect  Delloyd Ventures’ FFB production to increase by more than 20 per cent this year. From a yield of 15 metric tonne per hectare in 2010, we expect its Indonesian estate to improve yield to 19 metric tonne per hectare in 2011,” it highlighted.

Meanwhile, it also expected average CPO price for 2011 to rise seven per cent to RM3,000 per metric tonne before easing to an average of RM2,700 per metric tonne.

However, risks to its plantation earnings could come from sudden climate changes that would affect production and hence CPO prices. Higher fertiliser cost was also one of the concern, which was highlighted by the research firm.

UOBKayHian consensus valuation for  Delloyd Ventures was RM3.85 per share or 6.5 times 2012F price earnings. The market was projecting a 3.5 per cent net dividend yield for 2011.