• Overview. GENP’s 1Q21 revenue contracted 6% yoy to RM536.6m mainly due to lower sales volume from the Downstream segments on absence of biodiesel sales as well as lower property sales, as revenue recognised was at the early stage of property development (Table 2 and 3). Downstream manufacturing segment registered an EBITDA loss of RM5.9m against a profit of RM14.1m in 1Q20 whilst property segment dropped 8% to RM5.1m resulting from lower sales volume and capacity utilisation, as well as lower margins. On quarterly basis, the higher ASP realised of CPO and PK partially negated the drop in earnings that was attributed by a weaker contribution from both plantation and Downstream segment on account of lower FFB production and sales volume respectively.

• Against estimates: Inline. 1Q21 core PBT came in-line with our expectation.

• Key highlights. GENP’s FFB production in 1Q21 dropped 2% yoy and 26% qoq to 440,800MT on account of production setbacks in Malaysia that was largely attributed by the lagged effect of dry weather in early 2019 and 2020, aided by heavy rainfall in Sabah that had affected harvesting during the period. Conversely, Indonesian operations saw production growth with more planted areas coming into maturity and harvesting due to better age profile.

• Outlook. Although we expect performance of plantation segment to be driven by higher ASP of palm products and improve in production, there is high possibility of continuing margin squeeze in downstream segment on demand and price concerns due to unfavourable palm oil-gas oil (POGO) spread and prolong COVID-19 pandemic, aided by slow uptake in property segment. Conversely, both its Johor and Genting’s Premium Outlets may continue to experience lower patronage until concerns on the COVID-19 fully subside. According to management, unbilled sales stood at RM48m as at end-Mar 2021 against RM60m as at end Mar 2020 and RM35m as at end-Dec 2020.

• Our call. Maintain HOLD with new TP of RM9.00 from RM10.00 previously based on target BV/share of RM5.50 and historical 3-yrs avg. P/BV of 1.65x.

Source: BIMB Securities Research - 24 May 2021