KEY INVESTMENT HIGHLIGHTS

• Earnings sustained in black
• Plantation business: profit jumped on higher CPO selling price
• Sugar subsegment maintained its red
• Maintain NEUTRAL with a revised TP of RM1.16

Robust results. The 3FY24 PATAMI surged to RM87.2m brings 9M24 PATMI to RM160.0m (>100%yoy), driven by a higher average CPO selling price of RM4,004/Mt together with all Divisions reporting improvements except for Oils & Fats, which reported a 2%yoy decline in profit due to contraction in margin in bulk commodities and chemical subsegment as a result of price competition in the overseas market. Overall, the results came in broadly above/within our and consensus expectation at >100%/73% of full-year estimates.

Plantation and Downstream division. During the quarter, upstream's earnings surprisingly surged to RM95.4m (>100%yoy) as opposed loss of -RM0.68m in prior year. A part of the profit was somewhat supported by higher CPO production (+20.0%) which grew to 1.2m Mt, which resulted in a higher yield of 4.72Mt/ha. Notably, average CPO price realized was higher above RM4,000/Mt level, with estate operational costs narrowed -18%yoy. Meanwhile, a recovery in oil & fats profitability continued, albeit slower than expected RM94.8m (-14.9%yoy), margins were tighter, stemming from intense price competition in the local market exacerbated by strengthening Ringgit to USD.

Sugar division. The sugar segment continues its losses of -RM54.2m mainly due to a +14% increase in production costs, resulted from higher NY11, forex rate, and freight costs.

Logistic and Support division. The bulking segment continued to gain strong earnings momentum at RM46.6m (+12.1%yoy) primarily driven by a +7% rise in profits from the logistics segment, attributed to higher throughput handled and increased handling rate in bulking operations, as well as higher tonnage handled in the transport business.

Earnings. We have tweaked our earnings estimate to align with the new baseline projection. This is after considering new average CPO price target revision of RM4,2000/RM4,3000/RM4,000 per Mt, elevated cost of production, stabilized OER and FFB output, in light of the softer FFB yield anticipation over FY24E-26F on biological tree rest conditions and adverse weather conditions, as a result, our new normalised earnings are RM205.6m/ RM254.3m/ RM281.2m in those periods.

Maintain NEUTRAL. Our NEUTRAL call remains with a revised TP of RM1.15 as we rollover valuation year to FY25 BV/PS of 1.66 pegged to 0.7x P/BV - nearly to the mean 2y historical average.

Source: MIDF Research - 28 Nov 2024