Investment Highlights

• We maintain HOLD on Genting Plantations (GenP) with an unchanged fair value of RM6.55/share, based on a FY23F PE of 18x, which is the 5-year mean for large cap planters. We ascribe a 3-star ESG rating to GenP.

• GenP’s FY22 core net profit (ex-unrealised forex gains of RM2.4mil) was within our forecast but 10% below consensus estimates. GenP declared a final and special gross DPS of 19 sen in 4QFY22, which brings total gross DPS to 34 sen for FY22 (FY21: 30 sen). The gross DPS of 34 sen implies a yield of 5.6%.

• GenP’s core net profit expanded by 9% to RM469mil in FY22 on the back of higher palm product prices and a rebound in earnings from premium outlets. On a negative note, downstream EBITDA fell by 14.7% to RM503.9mil in FY22 due to lower demand for biodiesel and refined palm products.

• GenP’s average realised CPO price grew to RM4,100/tonne in FY22 from RM3,444/tonne in FY21. Average palm kernel price climbed to RM2,784/tonne in FY22 from RM2,590/tonne in FY21.

• GenP’s FFB production edged down by 1.5% in FY22 due to wet weather in Kalimantan and a shortage of workers in Malaysia. Also, GenP’s all-in cost of production increased to RM2,440/tonne in FY22 from RM1,900/tonne in FY21 on rising costs of wages and fertiliser.

• Share of earnings in premium outlets surged by64.5%YoY to RM35.4mil in FY22. Recall that visitor patronage and spending at the Johor and Genting Premium Outlets were affected by Covid-19 lockdowns in FY21.

• GenP’s downstream EBITDA margin slipped to 3.4% in FY22 from 3.7% in FY21 due to weak demand. Average utilisation rates were 23% in the biodiesel plant and 46% in palm refinery in FY22.

• Comparing 4QFY22 against 3QFY22, GenP’s pre-tax profit fell by 36.8% to RM67mil due to impairments on receivables of RM38.3mil. Average realised CPO price was RM3,620/tonne in 4QFY22 compared to RM3,368/tonne in 3QFY22.

• GenP is currently trading at a FY23F PE of 17x, which is in line with its 5-year average.

Source: AmInvest Research - 23 Feb 2023