TDM leads but will others follow?

IT WAS a pleasant surprise that TDM Bhd (2054), a plantation company from Terengganu, was willing to meet the financial press in Kuala Lumpur recently.

TDM is in a business that is known to be resilient.

Palm oil is not just used to make cooking oil, condensed milk or detergents, but it has emerged as a viable option for fuel. This means that the future is bright for planters.

Some investors have already noticed TDM and bought its stock. The counter has gained more than 18 per cent so far this year, while the broader market has lost about 3 per cent in the same period.
In fact, it is the third-best performer among Malaysian oil palm planters this year, according to Bloomberg data. Kurnia Setia Bhd leads with a gain of 25 per cent followed by TH Plantations Bhd with 22 per cent. IOI Corp Bhd is only up 6 per cent.

TDM is also in the pink of health. It has cash of RM131 million as at December 31 2008, while borrowings are just RM4.6 million.

Investors will probably love TDM more if its owners decide to free up more shares for trading. Currently, the stock is tightly held with the state government holding 72 per cent.

This means that there's a lot of room for improvement and the state may just do this when the market recovers.

TDM chief executive officer Badrul Hisham Mahari said he wants to address this issue within three years. He also promised to work out a dividend policy, which is popular among bigger stock market investors.

The company last paid a dividend in 2006, giving shareholders about 37 per cent of its earnings. Shareholders were not rewarded even when it almost tripled net profit to some RM100 million last year.

One explanation could be that it is keeping the money to expand. It has rights to plant over an area of 40,000 hectares in Kalimantan, which more than doubles its total land area.

It has also made the right moves over the last five years, selling non-core businesses. It used to hold stakes in chartered flight operator Pelangi Airways, quick service restaurant chain A&W and Perhentian Island Resort.

Now it wants to sell its loss-making poultry business.

Malaysia has quite a number of smallish plantation companies and they should follow the lead of TDM by being more open in communications.

The company had a good story to tell and they made the trip down to the capital. They should do it more often. And maybe they should hold their annual shareholder meetings in Kuala Lumpur.