• Maintain HOLD (TP: RM6.00). Genting Plantations Bhd (GENP) FY23 core PATAMI of RM267mn (-46% YoY) was within our and consensus estimates, accounting for 104% and 97%, respectively. The lower palm products price along with higher CPO production costs in plantation segment and lower sales volume in downstream segment contribute to the decline in earnings. Key takeaways from the results briefing include 1) FFB output will continue to grow in FY24 with 5% YoY growth, primarily from Indonesian estates due to improved age profile and increase in harvesting areas, 2) lower fertiliser cost and CPO production cost of circa RM2,400/MT-RM2,500/MT expected for FY24 [FY23: RM2,580/MT], 3) Malaysian estates is expected to allocate another 3,000ha for replanting [FY23: 4,500ha], 4) Group CAPEX in FY24 is expected to come-in around RM470mn vs. RM433mn in FY23, and 5) declared final DPS of 4sen and special DPS of 9sen, bring total DPS for FY23 of 21.0sen (FY22: 34.0sen). Maintain a HOLD call with a TP of RM6.00, based on average FY23F/24F BV/share of RM6.00 and P/BV of 1x.

• Key highlights. In 4QFY23, GENP’s revenue increased by 3% QoQ/1% YoY to RM800.5mn, primarily driven by higher revenue contributions from the plantation and property segments, amounting to RM650mn and RM31mn respectively (Table 2). However, the downstream segment experienced a decline in revenue, decreasing by 2% QoQ/37% YoY to RM265mn, primarily attributed to lower sales volumes of refined products, on account of stiff competition from Indonesian refineries. Hence, core PBT decreased to RM112mn in 4QFY23, marking a 15% decline QoQ and 0.03% increase YoY.

• Earnings Revision. No change in earnings forecast.

• Outlook. While we maintain a cautious outlook on GENP's plantation segment due to the anticipated slowdown in CPO prices, we anticipate that overall earnings will remain satisfactory, aligning with our forecasts. This expectation is primarily driven by sustainable profit contribution expected from plantation and property segments on account of robust production from its Indonesian estates as well as its potential for leveraging ongoing infrastructure projects and construction developments in Johor.

Source: BIMB Securities Research - 29 Feb 2024