Chin Teck Plantations ended FY22 with a record core profit of RM104m, up 52.4% YoY, mainly driven by stronger CPO prices despite lower FFB production. The strong set of results were in line with our and consensus expectations, making up 103% and 99% of full-year numbers, respectively. The full-year results would have been even better if not for the higher effective tax rate in 4Q due to the impact of Cukai Makmur. No dividend was declared for the final quarter. Nevertheless, we expect to see a softer outlook in line with the weaker CPO price performance. Maintain Neutral with an unchanged TP of RM7.83.

• 4QFY22 topline rose 23% YoY. During the quarter, the Group’s revenue climbed 23% YoY to RM63.6m, mainly led by an increase in both CPO selling prices and FFB production. Average CPO price advanced from RM4,290/mt to RM5,345/mt (FY22: RM5,226/mt vs FY21: RM3,591/mt) while 4QFY22 FFB production improved by 13.2% YoY to 49,098/mt (FY22: 176,966mt vs FY21: 187,483mt). Oil extraction rate for CPO improved from 19.47% to 19.62%. As of end-Aug 2022, total planted area stands at 10,960ha with 9,557ha in mature areas.

• 4QFY22 bottomline increased by 34% YoY to RM23.4m. The Group’s 4QFY22 core profit jumped from RM17.5m to RM23.4m, bolstered by stronger plantation margin on the back of a significant jump in CPO prices as well as higher contributions from interest income and dividend income. In addition, the steep decline in losses, down from RM4.8m to RM0.6m, incurred by the joint venture (JV) in Indonesian plantation also helped improve the group’s earnings.

• Disruption in JV-owned Indonesian plantation continues. Since 2012, the unrest in the surrounding villages located in the vicinity of the plantations in Lampung Province, Indonesia, has seriously affected the routine harvesting activities. As of now, the total accessed area is about 53% of the total planted area. Meanwhile, harvesting of the mature area located in South Sumatera Province has been delayed due to the unrest in the villages neighbouring the estate. Commencement of harvesting is pending clearance by the relevant authorities.

Source: PublicInvest Research - 31 Oct 2022