• Overview. 4Q19 core profit increased more than 100% yoy as revenue surged 33% on account of higher contribution from all segments. This came on the back of an increase in ASP realised of CPO and sales volume of biodiesel and refinery products, plus higher contribution from property sales. On qoq basis, improved palm products prices and higher sales volume from plantation segment lifted earnings.
   
• Key highlights. Management guided that the demand for downstream products in 2020 might be softer in view of the unfavourable palm oilgas oil (POGO) spread, the COVID-19 outbreak and import restriction on refined palm oil from India. Meanwhile, the Premium Outlets may experience lower patronage until concerns on the COVID-19 subside.

• Against estimates: above. FY19 core profit was above our estimates. Although revenue was higher by 19% to RM2.3b on account of rise in sales volume achieved by Downstream segment, bottom-line dropped 14% to RM142m. This is due to higher costs (+24% to RM1.85bn) and expenses (+15% to RM238m), as well as lower contribution from plantation segment.

• Dividend. A final DPS of 9.5sen (4Q18: 8.25sen/share) was proposed, if approved bringing total DPS declared/paid to-date of 13.0sen (FY18: 13.0sen/share) translating to DY of 1.3%.

• Outlook. We expect performance of plantation segment in 1Q20 to maintain given that current palm product prices are trading above 1Q19 prices. Nonetheless, there might be high possibility of margins squeeze in downstream segment on demand and price concerns.

• Our call. Maintain HOLD with TP of RM10.60 based on GENP’s historical 3-yrs average BV/share of RM5.30 and P/BV of 2x.

Source: BIMB Securities Research - 26 Feb 2020