Overview. GENP’s 3Q21 core PBT improved more than 100% to RM166.4m as revenue increased 14% to RM733m underpinned by higher contribution from 1) plantation segment on account of higher palm products selling prices, 2) higher margins from downstream manufacturing segment, and 3) lower cost of sales. On quarterly basis, the lower earning was attributed to lower contribution from property segment on account of lower sales and revenue achieved during the period. According to management, during the EMCO, all outlets at Johor and Genting Premium outlets were closed for 2.5 months i.e., from 1 Jun to 15 August 2021.

Against estimates: Inline. GENP’s 9M21 core earnings were within ours and consensus’ expectation. Revenue and core earnings increased 17% and more than 100% respectively to RM2.06bn and RM286.3m, mainly due to stronger performance of the Plantation segment and higher margins from Downstream Manufacturing segment.

Outlook. Although we expect performance of plantation segment to be driven by higher ASP of palm products and improve in production in Indonesian estates, 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. Nonetheless, we foresee both its Johor and Genting’s Premium Outlets may see some recovery given improvement in patronage and sales following the recent lifting of travel restrictions in Malaysia.

Our call. Maintain BUY with unchanged TP of RM9.00, based on BV/share of RM5.50 and historical 3-yrs avg. P/BV of 1.65x. Following this result, we revised our FY21/FY22 earnings forecast to RM387.5m and RM315.5m respectively from RM374.9m and RM351.4m previously as we revisit our assumptions on production, ASP of palm products, margins, costs and expenses including tax and levy to be more reflective to current and future expectations. We have cut our production number by 1% to 2.09m/2.20m tonnes respectively for FY21/22 whilst raising ASP forecast for CPO to RM3,300/MT for FY21 from RM3,150/MT previously.

Source: BIMB Securities Research - 25 Nov 2021