Stripping out i) foreign exchange gain (RM2.9m) and ii) net fair value gain on investment securities (RM3m), Chin Teck Plantations posted 1HFY24 core earnings of RM36.3m, up 12.7% YoY. The better results were in line with our and the street full-year expectations, making up 46% and 56%, respectively. In view of the stronger-than-expected results, we raise our FY24-26F earnings projection by 7-8% to account for improved OER and lower production cost. Maintain Neutral with a higher TP of RM8.38. No dividend was declared for the quarter.

• 2QFY24 topline rose 11% YoY. During the second quarter, the Group’s revenue increased from RM46.1m to RM51.2m, mainly led by higher FFB production despite posting lower average palm oil selling prices. Average CPO price retreated from RM3,965/mt to RM3,802/mt. 2QFY24 FFB production rose 10.6% YoY to 52,781mt (1HFY24: 117,274mt, YoY: +6.3%, making up 57% of our full-year forecast). Oil extraction rate for CPO climbed from 19% to 19.39%. As of 2QFY24, total planted area stands at 12,679ha with 10,829ha of mature area.

• 2QFY24 bottomline surged to RM19.6m. Stripping out foreign exchange gain (RM1.2m), the group’s 2QFY24 core profit surged from RM5m to RM19.6m, bolstered by i) lower CPO production cost due to a sharp decline in fertilizer cost, ii) higher CPO extraction rate and iii) lower administrative cost due to the absence of expenses related to acquisition of Fauzi-Lim Plantation S/B. Meanwhile, its Indonesia plantation associate turnaround with a small profit of RM0.7m.

• Disruption to JV-owned Indonesian plantation persists. 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.

• Strong cash position. As of 2QFY24, the Group is sitting on a net cash level of RM409m or RM4.47 per share, making up 60% of the market capitalization. In addition, it also owns investment securities worth RM140.2m.

Source: PublicInvest Research - 26 Apr 2024