• Overview. SPLB’s core PBT came in higher yoy to RM32.4m vs. RM13.8m in 2Q20 mainly due to higher sales volume and ASP realised for CPO and PK despite incurring higher production cost and operating cost amounting to RM156m vs. RM79m in 2Q20. On quarterly basis, the 63% increase in core profit was attributed by a higher ASP realized of CPO and PK as well as higher production and sales volume despite higher production costs and distribution expenses during the period. CPO and PK sales volume increased substantially to 15.8% and 23.0% respectively to 35,827 tonnes and 7,719 tonnes from 30,942 tonnes and 6,277 tonnes in 1Q21.

• Against estimates: Inline. SPLB’s 1H21 core PBT was within our estimates, making up 52% of our full year forecast. Core PBT increased more than 100% to RM52.2m mainly supported by higher sales volume and ASP realised of CPO and PK that were more than offset by a rise in production cost and operating cost. ASP realised for CPO and PK rose 63% and 72% respectively to RM4,035/MT and RM2,438/MT – Table 2.

• Outlook. We believe earnings performance would be more visible, in view of 1) its harvestable areas and crops profile has improved, hence will generate better yield and production growth, and 2) any earnings downside would be mitigated by the higher CPO prices anticipated which are currently trading above RM4,000/MT.

• Our call. Maintain HOLD with unchanged TP of RM2.64 based on P/B of 1.1x and BV/share of RM2.40. Given the encouraging results, we revised our FY21 and FY22 earnings forecast higher to RM79.8m and RM67.5m respectively from RM75.4m/RM66.8m previously as we adjusted our production, ASP of palm products, costs and margins assumptions. We revised higher our ASP forecast for CPO to RM4,050/MT for FY21 and RM3,000/MT for FY22 from RM2,950/MT and RM2,700/MT previously; whilst cut our production number by 12% to 350k and 390km tonnes respectively for FY21/22 to be more reflective to our current and future expectations.

Source: BIMB Securities Research - 30 Aug 2021