• Overview. SDPL’s 4Q21 core PBT increased significantly to RM1,113m against RM377m in 4Q20 and RM940m in 3Q21 mainly driven by higher contribution from all segments as well as higher share of profits from JV and associates. On quarterly basis, the Group’s PATAMI dropped 23% to RM468m weighed down by higher exceptional tax expenses and non-recurring losses of RM196m mainly due to impairment charge on the immature rubber plantation in Malaysia. The higher effective rate of 49% was due to withholding tax of RM188m incurred relating to remittance of intercompany dividends from foreign subsidiaries to Malaysia and recognition of deferred tax liability of RM78m on unremitted earnings of subsidiaries classified as assets held for sale.

• Against estimates: Inline. FY21’s core PBT of RM3.68bn was within ours and consensus’ expectations attributed to higher profits contribution from all segments, backed by strong performance from Upstream segment on account of higher palm products prices and better OER. This was also aided by lower finance costs and higher share of profits from associates and JV.

• Dividend. A final DPS of 12.38sen was declared, bringing total FY21’s DPS of 20.28sen (FY20: 11.57sen) and dividend yield of 4.1%

• Outlook. We are expecting a better performance in this financial year mainly supported by higher palm product prices, although volatile raw materials prices and intensified competition will remain challenging to manufacturing segment.

• Our call. Maintain BUY with new TP of RM5.50 against RM5.00 previously based on P/B of 2.5x and BV/share of RM2.20. To reflect higher CPO price assumptions and encouraging manufacturing division, we raised our FY22/23 earnings forecast higher to RM2.3b and RM1.7b respectively from RM1.7b and RM1.2b previously; as we also revised our assumption on productions, margins, costs and expenses to be more reflective of current and future expectations. We have raised our ASP forecast for CPO by 7%-15% for FY22/23 to RM4,180/MT and RM3,465MT, and reduced FFB production by 6%-7% respectively to 9.2m-9.3m tonnes.

Source: BIMB Securities Research - 21 Feb 2022