Investment Highlights

• We maintain BUY on Genting Plantations (GenP) with an unchanged fair value of RM6.80/share, based on a FY24F PE of 18x, which is the 5-year average for large-cap planters. We ascribe a neutral 3-star ESG rating to GenP.

• GenP has declared a final DPS of 13 sen, which brings total gross DPS to 21 sen for FY23 (FY22: 34 sen). We forecast a DPS of 25 sen for FY24F, which implies a yield of 4.1%.

• GenP’s FY23 core net profit of RM258mil (ex-urealised forex loss of RM4.5mil) was within our forecast and consensus estimates.

• GenP’s core net profit fell by 45% to RM258mil in FY23 from RM469mil in FY22, dragged by lower palm product prices and a higher cost of CPO production. Average realised CPO price retreated by 15% to RM3,483/tonne in FY23 from RM4,100/tonne in FY22. On a positive note, GenP’s FFB production rose by 6% in FY23.

• GenP’s all-in cost of production increased to RM2,580/tonne in FY23 from RM2,440/tonne in FY22 as costs of upkeep, wages and fertiliser climbed.

• Downstream EBITDA plunged to RM6.1mil in FY23 from RM50.9mil in FY22 due to a drop in demand and selling prices. Sales volume of refined and biodiesel products declined in FY23 as competition from Indonesian refiners was stiff. EBITDA margin was 0.5% in FY23 vs. 3.4% in FY22. Average utilisation rates were 23% for the biodiesel plant and 21% for refinery in FY23.

• Comparing 4QFY23 against 3QFY23, GenP’s core net profit slid by 22.3% to RM64.3mil as costs of production rose and FFB output softened by 0.7%. Average CPO price inched down to RM3,395/tonne in 4QFY23 from RM3,409/tonne in 3QFY23.

• Downstream division recorded an EBITDA of RM2mil in 4QFY23 vs. a loss of RM3.2mil in 3QFY23 as demand improved. EBITDA margin edged up to 0.8% in 4QFY23 from -1.2% in 3QFY23.

• GenP is currently trading at a decent FY24F PE of 16x, which is below its 5-year average of 17x.

Source: AmInvest Research - 29 Feb 2024