We reaffirm BUY on Genting Plantations (GenP) with an unchanged fair value of RM6.80/share, based on FY25F PE of 18x, which is the 5-year average for large-cap planters. We attach a neutral 3-star ESG rating to GenP.
On an annualised basis, GenP’s 1HFY24 core net profit of RM124.3mil (ex-unrealised forex gains of RM3.6mil) was 6% below our forecast but within consensus estimates. GenP’s results fell short of our expectations due to lower- than-expected plantation EBITDA margin. We have reduced GenP’s FY24E net profit by 4.6% to account for this.
GenP’s core net profit rose by 12% YoY to RM124.3mil in 1HFY24, underpinned by higher palm product prices and lower fertiliser costs.
FFB production edged down by 1.4% YoY to 941,000 tonnes in 1HFY24 while all-in cost of CPO production was slightly higher at RM2,880/tonne in 1HFY24 vs. RM2,850/tonne in 1HFY23. Average realised CPO price rose by 3.8% to RM3,721/tonne in 1HFY24 from RM3,584/tonne in 1HFY23.
Downstream EBITDA was relatively unchanged at RM7.5mil in 1HFY24 as demand for biodiesel and refined palm products was still weak. Downstream EBITDA margin inched up to 1.5% in 1HFY24 from 1.3% in 1HFY23. Average utilisation rates were 33% for palm refinery and 27% for biodiesel plant in 1HFY24.
Comparing 2QFY24 against 1QFY24, GenP’s core net profit almost doubled to RM84.3mil, driven by stronger FFB production growth of 5.9% and higher downstream earnings.
Average CPO price edged up to RM3,797/tonne in 2QFY24 from RM3,643/tonne in 1QFY24. Cost of CPO production declined to RM2,814/tonne in 2QFY24 from RM2,960/tonne in 1QFY24.
Downstream EBITDA rose to RM6.6mil in 2QFY24 from RM0.9mil in 1QFY24, supported by improved biodiesel demand. EBITDA margin was 2% in 2QFY24 vs. 0.5% in 1QFY24.
GenP is currently trading at an attractive FY25F PE of 15.5x, which is below its 5-year average of 17x.
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This book is the result of the author's many years of experience and observation throughout his 26 years in the stockbroking industry. It was written for general public to learn to invest based on facts and not on fantasies or hearsay....