• GENP’s FY18 PATAMI of RM164.9m came-in below expectation, making up 78%/76% of our and consensus’ full year forecast.

• Despite increase in revenue of 5% yoy to RM1.90bn on improved offtake from downstream segment and increase sales in property segment, PBT declined 55% yoy to RM207.7m owing to higher costs and weaker ASP of palm products.

• On quarterly basis, lower contribution from property segment on account of lower sales and, higher depreciation and finance costs contributed to lower PBT growth.

• We revised our FY19 and FY20 earnings forecast to RM184m and RM208m respectively from RM235m and RM280m previously, as we lower our margins assumptions by 2%-4.5% on concern of costs pressure moving forward.

• Maintain HOLD with unchanged TP of RM10.33.

Overall results below expectations

Although revenue for FY18 rose 5% to RM1.90bn as its biodiesel and refinery operations recorded higher capacity utilisation from higher offtake, coupled with higher sales from property segment, PBT dropped 55% to RM207.7m. The lower PBT resulted from higher costs and weaker palm products selling prices. Hence, PBT margin fell to 10.9% from 25.3% in FY17 (Table 1 and 2). On the other hand, EBITDA for property segment increased 54% yoy to RM36.2m owing to progressive completion of works and improved profits margins.

Weaker qoq performance

On quarterly basis, PBT dropped 41% qoq to RM14.8m on the back of 1% decrease in revenue to RM482.3m. The uninspiring results was due to lower profits from downstream segment and property segment as a result of lower sales and higher depreciation and amortisation costs, as well as finance costs.

Proposed dividend of 8.25sen

The Board has recommended a final dividend of 8.25sen for FY18, which would bring total dividend to-date for FY18 of 13.0 sen per share (FY17: 26.0sen). This would translate into DY of 1.2%.

Change in forecast, maintain HOLD

We revised our FY19 and FY20 earnings forecast lower to RM184m and RM208m respectively from RM235m and RM280m previously, as we adjusted lower our margins on account of higher costs of sales and finance costs. Nonetheless, we maintain our TP of RM10.33 (based on price to book target of 2x and historical 5-years average GENP’s BV/share of RM5.17) and HOLD recommendation.

Source: BIMB Securities Research - 27 Feb 2019