• GENP’s 9M17 PBT increased 68% to RM319m on the back of 32% increase in revenue to RM1,276m, mainly due to higher palm product prices, higher FFB production as well as higher sales of biodiesel and refined palm products.

• Group FFB production increased 25% yoy in 9M17, driven by Indonesia-estates that grew by more than 70% yoy to 491k MT and by 7% to 547k MT for Malaysia.

• However, net earnings of RM230m (excluding loss in foreign exchange of RM10m) is below our expectation – making up 66% of our full year forecast.

• Maintain our TP at RM11.92 with BUY recommendation.

Overall results still satisfactory

Revenue and PBT for 9M17 rose 32% and 68% respectively to RM1.3bn and RM319m. This was largely attributed to better plantation profit, which benefited from higher ASP and higher FFB production. The higher sales of biodiesel and refined palm products also aided to the increase in sales and earnings. Hence, there was an improvement in Group EBIT margins to 29% against 24% in 9M16.

Cost of production was well maintained

Earnings for group plantation segment increased 46% yoy to RM429.9m, thanks to the Plantation-Indonesia segment which saw earnings increased more than 100% to RM140m (9M16: RM34m). The Group also managed to keep CPO cost lower for 1H17. The blended CPO production cost stands at RM1,630/MT for the Group with Malaysia at RM1,300/MT and Indonesia at RM2,000/MT – and expects RM1,580/MT for full year 2017. The higher ASP realized and lower costs helped to improve the group’s plantation margin to 40% from 37% recorded in 9M16. We are still positive on GENP due to the progress in Indonesian estates which resulted from newly mature areas and the progression of existing mature areas into higher yielding age brackets. The additional 12,893ha planted ha newly acquired in Indonesia will also aided to the growth.

Property segment

As for property segment, the lower result was due to lower progressive profit recognition from projects that are initial stages of development. According to management, total sales achieved in 9M17 increased 11% yoy to RM111m while its unbilled sales stood at RM43m as at 30th September 2017.

Maintain forecast

We keep our FY17 and FY18 earnings forecasts unchanged and maintain our TP of RM11.92 - applying a target PER of 26x (GENP’s 3-years average) on FY18 EPS. Maintain BUY.

Source: BIMB Securities Research - 23 Nov 2017