R.E.A. Holdings (RE.L) Trading Update
The share price chart opposite makes for dismal reading. It reflects bothinvestor disappointment with the expensive disruptions to the year 2013 and
the legacy effects of those disruptions to normal operations in 2014 that have
combined with a weak commodity price to pressure profitability and cash
flows. What the chart does not speak of are estates now rising back to high
levels of productivity, of new incremental revenue opportunities from
electricity sales and further cost savings from the clever use of palm oil mill
waste. Nor does the chart reflect that the business has a secured land bank of
some 67,000 plantable hectares, of which only 34,000 ha are planted. At the
current level of Enterprise Value ($361m) the companyÂ’s planted assets are
trading at less than a 20% premium to cost of development.
R.E.A. Holdings is principally engaged in the cultivation of oil palms in the province of East Kalimantan in Indonesia and in the production and sale of crude palm oil and crude palm kernel oil. Ancillary to these activities, Co. generates renewable energy from its methane capture plants to provide power for its own operations and also for sale to local villages via the Indonesian state electricity company. As of Dec 31 2016, Co. held interests in respect of two stone deposits and two coal mining concessions, all of which were located in East Kalimantan in Indonesia.
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