• Keep NEUTRAL, with new SOP-based MYR1.27 TP from MYR1.28, 10% upside, c.4% FY25F yield. FGV Holdings’ 9M24 core earnings beat our and consensus estimates. We expect earnings to remain decent in 4Q24 on higher CPO prices, albeit offset by moderating FFB output and higher unit costs on increased fertilisation activities. Valuation remains unexciting – the stock is trading at 11.3x FY25F P/E, at the high end of its peer range of 7-11x.

• 9M24 core net profit came in above our and consensus expectations, at 140-230% of our and consensus FY24F. Core net profit rose strongly QoQ in 3Q24 to MYR208.4m (from MYR42.6m in 2Q24). The positive surprise came from stronger-than-expected FFB growth (+25% QoQ), lower-thanexpected unit cost (-17% QoQ) and stronger core PBT at its oils and fats division (+41% QoQ) in 3Q24.

• 3Q24 FFB output jumped 25% QoQ (+20% YoY), bringing 9M24 growth to +12% YoY. In YTD-Oct 2024, FFB growth slightly moderated to +10% YoY. This is in line with FGV Holdings’ previous guidance of +10-15% YoY and our 9.8% assumption. FGV continues to expect 10-15% growth for FY24. We maintain our FY24F FFB growth of 9.5%, and 3-4% growth for FY25F-26F.

• FGV booked 3Q24 ASP of MYR3,980/tonne (-3% QoQ), bringing 9M24 ASP to MYR4,004/tonne (+1.4% YoY). FGV had previously sold forward 22% of its West Malaysia output up to Sep 2024, at cMYR4,000/tonne. We await more information on forward sales for 4Q24 at the analyst briefing today.

• Unit costs fell 17% QoQ (20% YoY) in 3Q24 to MYR2,231/tonne, bringing 9M24 to MYR2,552 (-11% YoY). FGV applied 71% of its fertiliser for 9M24 (from 42% in 1H24), and expects to complete its programme by year end. This indicates that 4Q24 cost may rise QoQ. Despite this, FGV expects cost to fall 10% YoY to MYR2,500/tonne. We lower our assumptions accordingly.

• The oils and fats division saw a 41% QoQ rise in core PBT contribution in 3Q24, bringing 9M24 PBT down 5% YoY. This was led by higher volumes of bulk commodities but offset by weaker oleochemicals sales volumes. PBT margin also improved QoQ in 3Q24 to 2% (from 1.6% in 2Q24). We raise our margin assumptions to 2-4% for FY24-25.

• The sugar segment remained in the red in 3Q24, due to forex and hedging losses and higher raw sugar costs. Sales volumes rose 11% QoQ and 6% YoY in 3Q24, while ASP fell 7% QoQ, but rose 1.5% YoY. FGV expects this segment to return to the black in 4Q as raw sugar prices and USD/MYR rates have retreated vs 3Q24.

• Maintain NEUTRAL and MYR1.27 TP, post update of the sugar segment’s market value. We raise FY24F-26F earnings by 219%, 167%, and 124% after lowering unit costs, raising downstream margin, and updating sugar consensus numbers. Our TP includes a 12% ESG discount.

• Key risks include CPO price movement, weather, and demand and supply dynamics of the global vegetable oil industry.

Source: RHB Securities Research - 28 Nov 2024