Random Musings: Plantation Stocks, Food And Man United vs Chelsea

With the crude palm oil enjoying one of the most insane bull run in its history, I was most interested to have a look at the quarterly earnings report from the planters

The first to report was Rimbunan Sawit

I certainly wasn't impressed at all with Rimbunan Sawit despite the flashy headlines, the Edge published on their daily publications; Rimbunan Sawit profit triples to RM22.6m in 1H08

Year-to-year comparisons showed the massive good fortune brought to the planters from this insane bull run.

As seen above, current year-to-date earnings of 22.6 million triples the previous year same period earnings.

However, if on a quarter-to-quarter comparison, the quarterly earnings mentioned was rather shockingly poor! I mean, by logical reasoning, in an extremely hot commodity market, earnings should be surging and not declining, yes?

From the Edge article, Rimbunan Sawit profit triples to RM22.6m in 1H08

• “The unfavourable result is mainly due to decrease in production of fresh fruit bunches by 22%, despite a favourable variance of increase in CPO price of 7.6% during the quarter,” the company said in notes accompanying its unaudited accounts.

( This issue was posted in the following posting at Sahamas here )

Next to report its earnings was Chin Teck Plantations, a stock which I had blogged before, Hidden Gem In The Plantation Sector

And of course, like Rimbunan Sawit, its year-to-date comparisons were extremely impressive.

And the press was quick to highlight it, Chin Teck Q2 earnings up 215%.

However, if you look at the quarterly performance, ChinTeck's performance like Rimbunan Sawit was lacking, in my opinion. See the table below. The increase in earnings was so razor thin!

The management said the following in its notes.

• Revenue in the second financial quarter under review improved marginally by 0.23% from the preceding financial quarter due mainly to an increase in the average selling prices of crude palm oil and palm kernel even though the production of fresh fruit bunches, crude palm oil and palm kernel were lower.

Kinda disappointing isn't it?

As mentioned earlier, in an extremely bullish commodity markets, average selling prices should be increasing and this should bring more profits to the companies.

However, the early indicator, as seen from these two stocks, the quarterly earnings is not showing growth.

Would this be an early tell-tale sign on the sector?

Moving on, food is an issue, yes? Dali had two blog postings on this issue, Food, Glorious Food and The Food Train Wreck.

There is an interesting article from Ms.Teresa Lo, Agricultural Stocks Go To Harvest

It's interesting because the fundamentals reasoning is suggesting that agricultural stocks should be moving higher. I would assume that too.

Here are some links posted by Teresa. (I blogged on one of postings before Regarding the Dry Bulk Shipping Sector )

• Dramatic spike in cost of flour will drive food prices higher, manager warns[Editor: This can only happen in Vancouver, where a loaf of bread is ALREADY $5.00] A dramatic spike in the price of flour over the past two months has led to a dire warning from a Vancouver food store manager. “It’s just going up, going up. Pretty soon you’ll be paying $10 for a loaf of sliced bread,” said Tina Rua of the First Ravioli Store on Commercial Drive yesterday. “Our supplier has told us we might end up getting our deliveries in a Brink’s truck. All our prices have gone sky-high.”
  Skyrocketing rice prices has Sam’s Club limiting salesThe store will limit customers to four 20-lb. bags of jasmine, basmati and long-grain white rice, the company said in a statement. Its restriction mainly will affect businesses that buy rice in bulk, but the company said “a typical Sam’s Club Business Member does not buy more than 80 pounds of rice in one visit.”
  Food Rationing Confronts Breadbasket of the WorldAn anonymous high-tech professional writing on an investment Web site, Seeking Alpha, said he recently bought 10 50-pound bags of rice at Costco. “I am concerned that when the news of rice shortage spreads, there will be panic buying and the shelves will be empty in no time. I do not intend to cause a panic, and I am not speculating on rice to make profit. I am just hoarding some for my own consumption,” he wrote.
  Food Price Surge Could Mean ‘7 Lost Years’ in Poverty FightZoellick said the poor spend as much as 75 percent of their income on food. “In just two months, rice prices have skyrocketed to near historical levels, rising by around 75 percent globally,” he said. The price of wheat has risen 120 percent over the past year, he added. Over the past three years, food prices overall have risen 83 percent, the World Bank estimates.

As noted by Teresa,

• A great example is the across-the-board collapse of many agriculture and related stocks yesterday. The news said one thing, but the prices did something else. Momentum investors are now caught in a bind typically found after the enthusiasm phase of the investor sentiment cycle, much as there were caught in the dry bulk shipping mania

Interesting? See how the prices and the fundamentals 'diverged'?

Last but not least, I am reminded by dear old John, that the kick-off will be early! I am not to fall asleep! LOL!

Lost at what I am talking about?

Well, I am talking about footie. Chelsea will host Man United later this evening. Chelsea is unbeaten at home and despite all the Grunt-ing issues, they are still in chance to win the Premiership and Champions League double.

Yes John. I know John. If United plays the same way it did at Nou Camp, the draw should be enough for United to secure the title again.

But seriously, that's simply a disgusting manner to play footie and I would rather be knitting man!

Can United beat Chelsea?

Yes, I believe that they can and they will. I reckon Ronaldo to score too!

And wouldn't it be nice for your beloved Liverpool if United thumps Chelsea this evening? I bet you would simply love it!

:D