• FY23 core net profit of RM67m (ex-EI) was in line, at 100% of our full-year estimate but above Bloomberg consensus’ expectations at 111%.

• 4QFY23 core net profit (ex-EI) fell 67% yoy and 86% qoq to RM6m, primarily due to lower average CPO and PK selling prices.

• Reiterate Hold, with a GGM-derived TP of RM2.20. The net cash balance sheet and decent dividend yields of 4.5-5.0% should support the share price.

FY23 results in line

• Sarawak Plantation Berhad’s (SPB) FY23 core net profit of RM67m (excluding FV loss on biological assets of RM4m) was in line at 100% of our full-year estimate, but above

• FY23 core net profit fell 36% yoy, primarily due to lower average CPO selling price (- 24% yoy) and PK selling price (-33% yoy), despite sales volumes of CPO rising 8% yoy

• Core net profit (excluding FV gain on biological assets, gain on disposal of PPE, and write-offs of inventory/PPE) fell by 67% yoy and 86% qoq to RM6m in 4QFY23, similarly due to lower average CPO and PK selling prices offsetting stronger sales volume.

Bullish FFB target of 400,000 tonnes in FY24F set by management

• SPB had successfully recovered c.500ha of encumbered areas in FY23, in line with its annual target. Encumbered areas stood at 2,200ha on 31 Dec 2023 (vs. 2,700ha on 31 Dec 2022).

• Management has an optimistic target of FFB output rising by 25% yoy to 400,000 tonnes in FY24F (FY23: 318,774 tonnes) driven by increase in mature areas and higher FFB yields following consistent fertiliser application. We assume a far more conservative 4% yoy rise in FFB output to 332,688 tonnes in 2024F.

• Management also set a higher replanting activity target of 4,000ha in FY24F (vs. 1,100ha in FY23), with a total capex of c.RM50m.

Reiterate Hold, with an unchanged GGM-derived TP of RM2.20

• We expect net profit to dip 2% yoy to RM65.9m in FY24F due to further declines in CPO price, offsetting: 1) higher sales volumes, and 2) lower production costs.

• We keep our Hold call on SPB, with an unchanged GGM-derived TP of RM2.20, implying 9x CY24F P/E. We see good downside support from its net cash balance of RM186m and decent dividend yields of 4.5.-5.0% for FY24F.

• Upside/downside risks include strong/lower CPO production offsetting the weaker/higher CPO price, higher-/lower-than-expected FFB production, and increase/decrease in dividend payout. (+11

Source: CGS-CIMB Research - 27 Feb 2024