r/valueinvesting
LSIP free palm oil business
LSIP trades at negative EV with net cash exceeding market cap, implying the operating palm oil business is valued at less than zero.
- Net cash on balance sheet exceeds total market capitalization, creating an arbitrage opportunity where the core business is effectively free.
- Strong operational metrics with ~34% net profit margin and positive EBITDA despite being priced as a distressed asset.
- Zero debt structure and high Altman Z-Score indicate minimal bankruptcy risk, supporting the deep value thesis.
- Potential corporate governance risks or minority shareholder discount in Indonesian markets may justify the valuation gap.
- Cyclicality of palm oil prices could impact future cash flows, though current margins are robust.
- Liquidity constraints in IDR-denominated stocks might make it difficult for foreign investors to exit positions efficiently.
Been digging into LSIP (London Sumatra Indonesia) and the numbers are making me do a double take.
The basic situation:
• Market cap at IDR 1,100/share: \~IDR 7.5 trillion
• Cash on balance sheet (latest quarter): IDR 7,830 billion
• Total debt: zero
• Net cash: IDR 7,830 billion
The cash alone is worth MORE than the entire company at current prices. That means the market is pricing the actual plantation business — the palm oil mills, rubber operations, land across Sumatra and Kalimantan, 120 years of operating history — at literally less than zero.
The operating business they’re throwing in for free:
• Revenue TTM: IDR 5,549 B
• EBITDA TTM: IDR 2,386 B
• Net income TTM: IDR 1,890 B
• Operating cash flow TTM: IDR 2,312 B
• Net profit margin: \~34%
• Zero debt
• Piotroski F-Score: 6/9
• Altman Z-Score: 5.92 (extremely healthy)
EV/EBITDA is literally negative.