• Overview. FGV reported a core profit before tax of RM573m in 4Q21 as opposed to RM324m in 4Q20 mainly due to improved earnings from Plantation and Logistics segments – as margins rose owing to higher ASP of CPO achieved. This is backed by marginal increase in FFB and CPO production, and higher handling rate for logisticssegment. Gain/loss in FV on LLA, impairment and unrealised foreign exchange were the key variance versus our core earnings estimates. On quarterly basis, the higher earnings were attributed to higher profit contribution from plantation segment, as margin improved to 12.9% in 4Q21 from 10.3% in 3Q21 on account of higher ASP of CPO, aided by higher contribution from bulking division.

• Against estimates: Above. FY21 core PBT was above our and consensus’ estimates. Revenue and core PBT increased 39%/>100% respectively to RM19,575m/RM1,358m mainly attributed to the improvement in all sectors as margins increased significantly on higher ASP realised of CPO, higher gross margin in sugar sector and handling charges for storage segment.

• Key Highlights. FGV’s major shareholder, FELDA, has informed the Company in its letter dated 23 February 2022 that it wished to reiterate its intention not to maintain the listing status of FGV as indicated in its Offer Document dated 12 January 2021.

• Dividend. Board has declared a final DPS of 8.0sen for 4Q21, bringing total dividend to-date of 8.0sen for FY21 (FY20: 3.0sen) to be payable on 31 March 2022 translating to DY of 3.9% at current market price.

• Our call. Given the encouraging results, we revised our FY22/23 earnings forecast higher to RM828m/RM705m from RM323m/RM273.2m previously as we revisit our ASP of palm products, margins, costs and expenses including tax and levy to better reflect our current and future expectations of FGV’s business operations. We revised higher our ASP forecast assumptions for CPO to RM3,740/MT for FY22 and RM2,909/MT for FY23 from RM3,200/MT and RM2,700/MT previously. Maintain HOLD on the stock with new TP of RM1.82 vs. RM1.43 previously based on P/B of 1.1x and average FY22/23 BV/share of RM1.65.

Source: BIMB Securities Research - 1 Mar 2022