• Overview. Sarawak Plantations’ (SPLB) 4Q20 core PBT increased more than 100% yoy to RM20.6m as higher ASP realised for CPO and PK were more than offset by a 12.5% and 19.3% declined in CPO and PK sales volume. The increase in revenue of RM132.2m against RM108.9m in 4Q19, negated the higher cost incurred in production and operating cost amounting to RM111.8m (+11.5% yoy). The difference between reported PBT and core PBT being change in FV gain/loss of biological assets amounting to RM1.26m (4Q19: RM1.8m; 3Q20: RM4.3m; FY20: 15.6m; FY19: RM4.7m). On quarterly basis, a decline in profit was attributed by a lower productions and sales volume of CPO and PK despite a higher realized ASP of CPO and PK as well as lower production cost and operating cost during the period (Table 2).

• Against estimates: Below. FY20 core earnings came in below our estimates. Lower than-expected realised average CPO and PK price, and cost of sales were the key variances against our forecast. We believe the ASP realised of RM2,704/MT would have been better had if not been for some forwards sales locked in earlier when prices were in uptrend.

• Key highlights. FY20 earnings increase more than 100% to RM61.0m as higher ASP realised and sales volume of CPO and PK were more than offset by a 23.3% increase in production cost and operating cost amounting to RM399.8m. Sales volume of CPO and PK increased 1% and 2% yoy respectively to 140.3k tonnes and 30.1k tonnes with ASP of CPO and PK realised improved 30% and 33% respectively to RM2,704/MT and RM1,521/MT (Table 2).

• Outlook. We believe earnings performance would be sustained, in view of higher price anticipated and improved production and sales volume. For the 12-month period, FFB yield has improved to 17.46MT/ha from 15.98MT/ha recorded in FY19 given increased in harvestable area and better estates management practise.

• BUY call maintain. No adjustment was made to our earnings forecast. We maintain our Target Price of RM2.50, pending earnings review, based on P/B of 1.0x and FY21 BV/share of RM2.46.

Source: BIMB Securities Research - 22 Feb 2021