Investment Highlights

• We are downgrading Genting Plantations (GenP) to SELL from HOLD with an unchanged fair value of RM8.00/share. Our fair value for GenP is based on a FY23F PE of 22.0x. Our FY23F net profit, which is based on an average CPO price of RM3,000/tonne, is unchanged.

• However, for FY22F, we have raised GenP’s net profit by 37.9% to account for a higher average CPO price of RM4,000/tonne vs. RM3,000/tonne previously. We ascribe a three-star ESG rating to GenP.

• GenP has declared a special and final gross DPS of 19.0 sen in total for 4QFY21. This brings total gross DPS to 30.0 sen for FY21, which translates into a yield of 3.6%. We have forecast a gross DPS of 30.0 sen for FY22F.

• GenP’s FY21 core net profit (ex-unrealised forex gains of RM2.0mil) was 14.8% above our forecast and 9.5% above consensus estimates.

• The discrepancy between our estimates and the actual core net profit was due to a stronger-than-expected EBITDA margin. GenP did not complete its fertiliser application in 4QFY21 due to heavy rains at its estates in Sabah and Central Kalimantan. GenP had applied 85% of its full year fertiliser requirements in FY21 compared to 100% in FY20.

• GenP’s core net profit surged by 67.5% to RM430.2mil in FY21 from RM256.8mil in FY20 on the back of strong palm product prices. Average CPO price realised jumped by 37.2% to RM3,444/tonne in FY21 from RM2,511/tonne in FY20. However, FFB production edged down by 3.2% in FY21.

• GenP’s downstream division reported a higher EBITDA of RM59.7mil in FY21 compared with RM33.5mil in FY20 underpinned by increased refining profits. The refinery unit benefited from a rise in selling prices and timely purchases of feedstock. On a negative note, average utilisation rate of the biodiesel plant was only 21% in FY21.

• Share of net profit in associates (mainly premium outlets) plunged to RM21.5mil in FY21 from RM32.5mil in FY20 as visitor patronage was affected by the ban on inter-state travelling during MCO 3.0. Pre-pandemic, the Johor Premium Outlet used to attract about four million visitors per year while the Genting Highlands Premium Outlet would attract about five million visitors.

Source: AmInvest Research - 24 Feb 2022