Genting Plantations (GENP) 1H23’s core PATAMI declined by 68% YoY to RM104.2mn due to lower contributions from all segments consistent with lower revenue, higher operating and finance costs as well as lower share of results in joint-venture and associates. Overall, the result came in within our expectations but trailed consensus’ forecast, representing 52% and 35% of full year forecast, respectively. The group declared an interim DPS of 8.0sen (vs. 15.0sen in 2Q22), equivalent to a yield of 1.4% based on current market price. Maintain earnings forecast with TP of RM5.87, based on average FY23F/24F BV/share of RM5.87 and P/BV of 1x. Maintain a HOLD call.

• Within expectations. GENP’s 1H23 core PATAMI of RM104.2mn (- 68% YoY) came in within our expectations but trailed consensus’ forecast – largely due to lower contributions from all segments that aligned with lower revenue, higher operating costs, finance costs and lower share of results in JV and associate. Nonetheless. property segment’s EBITDA was higher YoY due to a gain on disposal of investment properties, amounting to RM5.7mn.

• Dividend. The group declared an interim DPS of 8.0sen (vs. 15.0sen in 2Q22), resulting in a yield of 1.4% based on current market price.

• QoQ. On a quarterly basis, core PBT increased to RM102.6mn (+96% QoQ) consistent with higher revenue of RM806mn (+38% QoQ) in 2Q23, mainly due to higher profit contribution from plantation segment on account of higher palm product sales volume, higher share of results in JV and associate amounting to RM1.25mn (+58.7% QoQ) and lower cost of CPO production of RM2,760/MT (-6.8% QoQ). FFB production improved by +9% QoQ to 954k MT, primarily due to the improvement in production from Indonesian estates thanks to more planted areas come into maturity and higher harvesting activity.

• YoY. GENP reported a 69% YoY decline in core PBT in tandem with a -23% YoY drop in revenue, primarily due to lower profit contribution from all segments as margin decreased by 18.4ppts to 12.7% on account of weaker palm products prices (CPO: -27% YoY; PK: -44% YoY) despite a slight improvement in FFB production, that mainly contributed by Indonesian estates.

• Outlook. GENP is poised to sustain its earnings, given encouraging CPO prices momentum currently which has been trading in the range of RM3,700/MT to RM4,000/MT, and the expected 5% improvement in FFB production to approximately 2.0mn-2.1mn tonnes in FY23. This view is supported by management's optimistic outlook that FFB production will catch up in 2H23 to recover from the shortfall and achieve the 5% target for this year, mainly driven by its Indonesian estates

• Our call. No change in earnings forecast. Maintain a HOLD call with Target Price to RM5.87 based on average FY23F/24F BV/share of RM5.87 and P/BV of 1x. As such, we advise investors to take any stock price rally as an opportunity to lock in their profit.

Source: BIMB Securities Research - 24 Aug 2023