• Overview. GENP’s 2Q20 core PBT improved 36% yoy to RM28.4m as revenue increased 4% to RM544m underpinned by higher palm products selling prices that partially negated the lower sales registered by Property and Downstream Manufacturing segments. On quarterly basis, lower profit from all segments dragged the earnings lower (Table 2 and 3) – resulted from lower ASP of palm products and lower sales from downstream and property segments. According to management, included in the EBITDA for property segment is gain derived from sale of an investment property in Bangi, Selangor amounting RM11.3m.

• Against estimates: inline. 1H20 core profit was within our estimates. Revenue was lower by 3% yoy to RM1.13bn, resulting from lower FFB production, lower property sales and weaker demand for biodiesel and refined palm products of Downstream segment. Nonetheless, bottom-line was lifted by higher minority interests and lower effective tax rate.

• Dividend. The Board has declared an interim DPS of 6.0sen for 1H20 (1H19: 3.5sen) – translating into DY of 0.6%, based on current market price.

• Outlook. We are cautiously positive on the performance of GENP. Although we expect performance of plantation segment in the coming quarter to be satisfactorily, there is high possibility that there will be a margin squeeze in downstream segment on higher feedstock cost and subdued demand. Besides, both its Johor and Genting’s Premium Outlets may continue to experience lower patronage until concerns on the COVID-19 fully subside.

• Our call. Maintain HOLD with unchanged TP of RM10.00 based on target BV/share of RM5.50 and P/BV of 1.8x. We have revised our FY20 and FY21 earning forecast higher to RM153m (+6%) and RM155m (+1%) respectively as we adjusted our production, ASP of palm products and margins on account of higher costs and lower demand anticipated.

Source: BIMB Securities Research - 27 Aug 2020