Although Genting Plantations' (GenP) 3QFY24 results were unexciting, we believe that 4QFY24 would be stronger, driven not only by higher FFB production in Indonesia but also by sales of inventory carried over from 3QFY24. As such, we maintain BUY with an unchanged target price of RM7.55/share, which is based on a FY26F PE of 18x. The PE of 18x is the group's five-year average. We attach a 3-star ESG rating to GenP.

• 9MFY24 core net profit (ex-unrealised forex gains of RM21.7mil) was within our forecast and consensus. We expect 4QFY24 to be stronger underpinned by higher sales volume resulting from increased FFB production in Indonesia and inventory carried over from 3QFY24. Inventory of CPO stood at 60,000 tonnes as at end-September 2024. Although GenP's FFB production rose by 12.2% QoQ in 3QFY24, plantation revenue only expanded by 8.6% to RM613.9mil.
• Core net profit dipped by 2.3% YoY in 9MFY24 due to a higher effective tax rate and asset impairment. Effective tax rate rose to 29.9% in 9MFY24 from 27.6% in 9MFY23 due to higher expenses, which were not tax-deductible. GenP also recorded a larger asset impairment of RM19.2mil in 9MFY24 vs. RM6mil in 9MFY23. The asset impairment was in respect of plasma receivables in Indonesia.
• FFB production eased by 3.3% YoY in 9MFY24. We attribute the poor FFB output to tree stress in Indonesia. About 50% to 60% of GenP's FFB production are from Indonesia. Average CPO price realised rose by 5.8% to RM3,722/tonne in 9MFY24 from RM3,517/tonne in 9MFY23.
• Downstream EBITDA doubled to RM8.9mil in 9MFY24 from RM4.1mil in 9MFY23. This was due to higher sales volume and selling prices for refined palm products. Downstream EBITDA margin edged up to 1.2% in 9MFY24 from 0.5% in 9MFY23.

Source: AmInvest Research - 28 Nov 2024