• Maintain HOLD (TP: RM6.00). Genting Plantations Bhd (GENP) reported a core PATAMI of RM46mn in 1QFY24, reflecting a 29% YoY increase. This result was broadly in line with our expectations but fell below consensus at 19% and 15% of full-year forecast, respectively. The promising result was primarily driven by higher palm product prices and increased FFB production in the plantation segment, which offset the impact of lower sales volume in the downstream segment. Key takeaways from the results briefing include: 1) FFB output is expected to grow by 5% YoY in FY24, primarily from Indonesian estates due to improved age profile and increase in harvesting areas, 2) lower fertiliser costs (estimated to be around 12%- 13% lower YoY) and a CPO production cost of approximately RM2,500/MT for FY24 compared to RM2,580/MT in FY23 and RM2,960/MT in 1QFY23, and 3) Malaysian estates are expected to allocate another 2,800ha for replanting in FY24, following 4,500ha in FY23 and about 200ha to date. Maintain a HOLD call with a TP of RM6.00, based on average FY24F/25F BV/share of RM6.13 and P/BV of 0.98x.

• Key highlights. In 1QFY24, GENP’s revenue increased by 4% YoY to RM605.8mn, primarily driven by higher revenue contributions from the plantation and property segments, amounting to RM525mn and RM34mn respectively (Refer to Table 2). However, the downstream segment experienced a revenue decline, decreasing by 12% YoY to RM185mn, as margins were squeezed due to lower sales volumes of refined products, driven by stiff competition from Indonesian refineries. Conversely, revenue and core PBT dropped by 24% and 43%, respectively, on a quarterly basis due to lower contributions from all segments.

• Outlook. We maintain a cautious outlook on GENP's long-term prospects, anticipating that overall earnings will remain satisfactory and align with our forecasts. This expectation is primarily driven by sustainable profit contributions from the plantation and property segments, supported by robust production from its Indonesian estates and the potential to leverage ongoing infrastructure projects and construction developments in Johor.

Source: BIMB Securities Research - 30 May 2024