• SOP reported a strong set of FY17 results with PATAMI coming in at RM239.3m. Core PATAMI of RM218.0m was inline with our forecast of RM218.3m

• Adjusted for unrealized gain on foreign exchange and fair value gain on derivatives financial instruments, core PBT rose 61.5% yoy to RM338.5m, as revenue surged to RM4.91bn (+11% yoy) due to higher production volume and higher ASP realized of palm oil products and PK products.

• Core PBT of RM83.9m in 4Q17 dropped 6% qoq resulting from lower production and palm products transacted volume.

• On yoy basis, revenue and core PBT was higher by 16% and 34% respectively to RM1.36bn and RM83.9m on account of higher production and palm products transacted volume.

• We make no change to our earnings forecast for FY18 and FY18 with TP of RM6.00. Maintain BUY.

Earnings within expectation

SOP’s FY17 revenue and core PBT surged 11% and 62% to RM4.9bn and RM338.5m respectively as higher FFB, CPO and PK production (+36%, +25% and 23% yoy) and ASP for palm oil products (+9% yoy) and PK products (+2% yoy) contributed to higher revenue and earnings in palm oil segment. Hence, PBT margin improved strongly to 6.9% from 4.7% recorded in FY16.

Earnings higher yoy in 4Q17

On qoq basis, adjusted PBT dropped 5.7% to RM83.9m as there was a decrease in production and palm products transacted volume as well as 16% increase in operating expenses to RM1.27b. On yoy basis, core PBT was higher by 34% as revenue surged 16% on higher production and palm products transacted volume.

Positive on SOP outlook, maintain BUY

We maintain our FY18 and FY19 earnings forecast to RM214m and RM221m respectively as we believe the improvement in FFB production will partially offset the anticipated lower palm product prices moving forward. We forecast that for FY18, FFB production will hit 1.49m tonnes vs. 1.33m tonnes in FY17. Maintain Target Price at RM6.00 based on SOP’s 5-years average PER 16x on FY18F EPS.

Source: BIMB Securities Research - 1 Mar 2018