• Overview. 1Q20 core PBT increased 86% yoy to RM10.1m as revenue rose 42% to RM98.9m on higher sales volume and ASP realised of CPO and PK. On qoq basis, core PBT improved 14% as higher ASP realised of CPO and PK negated the lower sales volume of CPO and PK during the period.

• Against estimates: Inline. 3M20 core earnings was within ours and consensus’ estimates. Sales volume of CPO and PK increased 5.2% and 3.3% yoy respectively to 30.9k tonnes and 6.5k tonnes with ASP of CPO and PK realised improved 32% and 40% respectively to RM2,643/MT and RM1,597/MT.

• Dividend. The board has declared an interim DPS of 5sen (FY19: 5sen) for FY20. At current market price, this would translate into DY of 3.1%.

• Outlook. We believe earnings would be sustained in the coming quarter, in view of improved sales volume and better palm products prices anticipated. We understand that SPB has secured contract sales to be delivered in Q2 and Q3 priced around c. RM2,500/MT.

• Our call. Given that plantation companies are likely to continue to be vulnerable to several challenges, we tweaked our FY20 and FY21 earnings forecast lower to RM25.7m (-26%) and RM37.1m (-8%) respectively - as we lowered our ASP of CPO to RM2,300/MT from RM2,480/MT previously. We changed our Target Price to RM1.75 from RM2.05 previously, based on average 3-yrs P/B of 0.85x and FY21 BV/share of RM2.06. BUY on weakness.

Source: BIMB Securities Research - 29 May 2020