• Maintain HOLD (TP: RM4.68). SD Guthrie Bhd (SDG) 1H24’s core PATAMI of RM229mn, was in line with both our and consensus forecast, accounting for 55% and 45% respectively. The group’s plantation and downstream segments delivered strong results, with revenue and core PBT increased by 11% and 50% YoY to RM9.3bn and RM969mn respectively. This growth was driven by higher recurring profits, with the upstream segment benefiting from an 8.2% YoY increase in FFB production, lower operational costs, and strong CPO and PK realised prices, while the downstream segment was driven by higher margins achieved in all regions, supported by better prices, higher sustainability premiums and improved product mix. SDG declared a 1st interim DPS of 4.65sen (2Q23: 3.25sen), payable in November 2024. We maintain a HOLD call with TP of RM4.68, based on a P/BV of 1.8x and a BV/share of RM2.60.

• Key highlights. In 2Q24, core PBT rose by 66% QoQ and 60% YoY to RM415mn, primarily driven by higher profit contributions from both upstream and downstream segments. The increase in upstream profit was mainly due to: i) a rise in the group’s FFB production (+11% QoQ; +8% YoY), ii) higher CPO and PK realized ASP of RM4,029 and RM2,166 respectively (refer to table 2), and iii) improved margins in downstream segments. The downstream segment also benefited from stronger demand for Asia Pacific bulk and differentiated refineries, as well as higher share of profit from JV. In a separate announcement, SDG signed an MOU with TH Properties yesterday to jointly develop a HALMAScertified Managed Industrial Park on 464 acres of SDG’s estates at Bukit Pelandok, Negeri Sembilan. We view this move positively as it can unlock the value of its estates, which are located within the Malaysian Vision Valley 2.0. The estimated market value of the land for the development is above RM220mn

• Outlook. We reaffirm our view that SDG will achieve sustainable performance in FY24, driven by higher upstream earnings from Malaysian estates, improved production, stable CPO prices (RM3,800-RM4,000/MT), and lower costs. However, this positive outlook could be moderated by risks such as weakerthan-expected production due to weather in Indonesia, increased competition from soybean oil, and subdued global demand.

Source: BIMB Securities Research - 22 Aug 2024