Investment Highlights

• 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.

Source: AmInvest Research - 29 Aug 2024