Genting Plantations saw its FY21 core earnings nearly doubling to RM447m after stripping out i) impairment loss (RM30.9m) ii) deferred income for government grant (RM13.7m) and iii) foreign exchange changes (RM2m). The full-year results were in line with our expectation but exceeded street expectations by 13%. The record earnings were mainly driven by stronger plantation earnings. A special DPS of 15sen and a final single-tier DPS of 4sen have been declared, bringing the full-year DPS to 30sen. Maintain Neutral with an unchanged TP of RM9.02.

• 4QFY21 revenue (QoQ: +46.1%, YoY: +44.8%). The stronger topline of RM1bn was driven by plantation and downstream manufacturing sales. Plantation sales jumped 54% YoY to RM674m, lifted by an increase in CPO prices despite weaker FFB production. Average CPO prices rose from RM2,587/mt to RM4,007/mt (FY: RM3,444, YoY: +37%) while 4QFY21 FFB production slipped 13.7% YoY to 516k mt, dragged by lower production from Indonesia and muted growth from Malaysia due to high rainfall, which disrupted harvesting activities. Property sales fell 25% YoY to RM35m, dragged by softer property sales recognition from Genting Indahpura project. Downstream manufacturing sales rose 40% YoY to RM573m, supported by more carry forward shipments during the quarter.

• 4QFY21 core earnings jumped to RM162m. Stripping out the exceptional items, the Group’s core earnings jumped 64% YoY to RM162m. Plantation pre-tax profit gained 64% YoY to RM308m, spurred by stronger plantation margin. FY21 all-in CPO production cost was marginally higher at RM1,900/mt. Biotechnology segment made a narrower loss of RM0.4m on lower R&D expenditure. Downstream manufacturing earnings doubled to RM16.2m on account of higher margins but was partly moderated by lower sales volume. Meanwhile, earnings contribution from the jointly-owned Johore Premium Outlet (JPO) and Genting Premium Outlet (GPO) improved by 28% YoY to RM12.7m following the uplifting of interstate travel ban.

• Outlook. Management maintains its FFB production growth of 5-8% for FY22, led by double-digit production growth from Indonesia. CPO production cost for 2022 is expected to stay at RM1,900/mt, supported higher PK credit and higher production. It also targets to replant another 4,500ha for this year (FY21: 4,000ha replanted). Due to high rainfall towards end-2021, fertilizer application reached only 55%. The group sees a 100% jump in fertilizer price (nitrogen and phosphorus) due to supply disruption. Meanwhile. The group has sold forward about 15% of group production at CPO price of > RM4,000/mt. Unbilled property sales stood at RM49m as of end-FY21. Meanwhile, the footfall for each premium outlet has only recovered to about 33% of pre-covid level of around 4.5m. Capacity utilization for biodiesel and refining was at 51% and 60%, respectively. Lastly, the allocated capex for FY22 is about RM500m (vs FY21: RM321m), mainly to cater for the construction of a new mill in Indonesia and replanting activities.

Source: PublicInvest Research - 24 Feb 2022