• SDPL recorded a core PATAMI of RM185m for 6-months ended Dec 2018, which was within our expectation, making up 102% of our full year forecast.

• Its PBT of RM457m was 76% lower yoy resulting from a shortfall from plantation segment on lower average selling price of CPO and PK.

• On quarterly basis, revenue and PBT were higher by 15% and 16% respectively mainly attributable to downstream operations on account of better margins and higher sales volumes, aided by gain on sale of 51% equity stake in Nha-be.

• Declared final single dividend of 1.7sen, payable on 21 May 2019.

• We retain our FY19 and FY20 earnings forecast with new TP of RM5.03 vs. RM4.50 previously. Maintain HOLD.

Overall results within expectations

SDPL posted a lower profit of RM224m for 6-months ended Dec18 vs. RM1.45bn in 1H18. The lower profit was due to lower contribution from plantation operations on account of lower CPO and PK prices realised of RM1,974/MT (-26%) and RM1,479/MT (-38%) respectively. This was also aided by the non-recurring profit of RM749m recorded in 1H18 relating to the gain on sale of land to related party and one-off writeback of donation to Yayasan Sime Darby. However, this was cushioned by higher downstream profit, attributable by bulk business due to higher sales volume and better margins – mitigating the lower profit from differentiated business and speciality products due to lower demand and declining margin (Table 2).

Better qoq performance

On quarterly basis, improved contribution from its Downstream operation negated the decline in Upstream operations, mainly from Indonesia and PNG as a result of declining ASP of CPO and PK. The improved performance overall was due to non-recurring gain on sale of 51% equity stake in Golden Hope Nha-be, Vietnam amounting to c. RM30m.

Declared 1.4sen dividend

SDPL has declared a final single tier dividend of 1.7sen per share for FYE Dec 2018, payable on 21 May 2019. This would translate into DY of 0.3%.

Maintain earnings forecast with new TP of RM5.03

No change in our earnings forecast. However, we introduce a target price of RM5.03 (RM4.50 previously) and retain our HOLD recommendation. Our target price is based on target P/BV of average IOI and KLK of 2.5x and BV/share of RM2.01.

Source: BIMB Securities Research - 28 Feb 2019