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KS Oils buys 50,000 acres of palm plantation in Indonesia


KS Oils, a company I talked about as having huge insider trades (“Insiders Buy The Big Dip“), has just acquired 50,000 acres of palm plantations in Indonesia.

They will invest Rs. 230 cr. for this, over three years. Not huge, considering they will make sales of 1600 cr. for the year and a profit of 110 cr. or so (likely).

This should ensure lower supply cost. At commodity costs today palm oil is expensive, and margins will stay low if the prices continue to rise. KS Oils currently imports nearly all its oil. The plantation’s yield of 80,000 MT is about 2.5% of India’s oil imports, which is quite impressive then as an acquisition.

Additionally, duties on palm oil have been slashed recently, giving a higher edge. The acquisition should yield returns after around three years.

Ok so 1) Insider buying and 2) Acquisition. Anything else? 3) Institutional interest. Lot of institutional buying has happened in the stock, but at low prices. Don’t know what to make of that, yet. And 4) Power: They have a power division that gets money from Wind Energy.

Negatives: Input prices will stay high until the commodity cycle reverses. I also don’t understand the business, and it makes very small margins (<10%). All technicals are negative - MACD, moving averages, Relative Strength etc. There may be a better price point available. P/E still at 15 or so, which is not "value". (Though EPS growth is nearly 25%)

Disclosure: No positions. This may be a time for bargain hunters but this is not a bargain at this price. A bargain would be Rs. 40. But it is a momentum story, and if it needs to be picked up, the technicals should show signs, not just the (already sound) fundamentals.


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