Stripping out i) foreign exchange gain (RM1.7m) and ii) net fair value gain on investment securities (RM3m), Chin Teck Plantations kick started 1QFY24 with core earnings of RM16.7m, down 30.4% YoY. Nevertheless, the weaker results were in line with our and the street full-year expectations, making up 26% and 25%, respectively. Maintain Neutral with a higher TP of RM7.78 after rolling over our valuations to FY25. A first interim dividend of 8sen and a special single-tier dividend of 4sen were declared for the quarter.

• 1QFY24 topline was marginally higher. During the first quarter, the Group’s revenue increased from RM62.9m to RM63.2m, mainly led by higher FFB production despite posting lower average palm oil selling prices. Average CPO price retreated from RM4,036/mt to RM3,765/mt. 1QFY24 FFB production rose 3% YoY to 64,493mt. Oil extraction rate for CPO climbed from 19.4% to 19.5%. As of 1QFY24, total planted area stands at 12,679ha with 10,984ha of mature area.

• 1QFY24 bottomline dropped 30.4% YoY. Stripping out net fair value gain on investment securities (RM3m) and foreign exchange gain (RM1.7m), the group’s 1QFY24 core profit dipped from RM24m to RM16.7m, mainly weighed by higher administrative expenses and minimal contribution from the associates compared to RM3.5m a year ago The increase in administrative expenses from RM5.9m to RM7.9m was attributed to the acquisition of a subsidiary, Fauzi-Lim Plantation S/B. Meanwhile, its Indonesia plantation associate was loss-making while the earnings from the property development associate shrank.

• Disruption to 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 remains at 53.61% of the total planted area. Meanwhile, harvesting of the mature area located in South Sumatera Province has also been delayed due to the unrest in the neighbouring estate. According to management, commencement of harvesting is pending clearance by the relevant authorities

Source: PublicInvest Research - 30 Jan 2024