Anglo-Eastern Plantations [LON:AEP] has seen its share price sold down considerably since May, dropping from £7.66 to currently trade in the region of £6.16. It is part of a considerable correction for investors, who have seen the stock lose over 15% in the last 12 months.
Yet the metrics for Anglo-Eastern Plantations are still indicative of a relatively high quality stock. The big question, however, is whether the shares still look overvalued above £5?
What does Anglo-Eastern Plantations do?
Anglo-Eastern Plantations was founded in 1985 and operates palm oil and rubber plantations in Malaysia and Indonesia. It manages a planted area of approximately 90,000 hectares in Southeast Asia. It has seven palm oil mills in Indonesia, but it is also active in the fruit sector.
The company buys fresh fruit from third-party producers including smallholders in the region and is in the process of migrating some of its rubber land over to the more lucrative palm oil. On the ESG/green energy front, the company has four mills equipped with biogas plants that can capture methane gas emissions to generate electricity, for its own consumption.
What did the last set of results look like?
Anglo-Eastern reported on 23 August with revenues of USD 83m and a net income of USD 13.9m. There was a substantial increase in earnings per share and the EBITDA margin showed an improvement. Free cash flow has also increased and the company is in dividend paying and stock repurchase mode. Management likely wants to do this while stock looks relatively cheap with a PE under 5x.
The Anglo-Eastern balance sheet looks strong and there are no outstanding bank loans. Net assets were USD 519m (30 June 2024). There is also a lot of cash on the balance sheet.
Where are the problems and risks for Anglo-Eastern Plantations?
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