• Overview. GENP’s core PBT improved more than 100% yoy to RM180m in 1Q22 thanks to higher contribution from the plantation segment on account of higher palm product selling prices, and higher margins from the downstream manufacturing segment (Table 2). On a quarterly basis, the higher ASP realised of CPO and PK partially negated the drop in earnings owing to weaker contribution from all segments on account of lower FFB production and sales volume.

• Against estimates: Inline. GENP’s 1Q22 core profit was within our expectations.

• Key highlights. GENP’s FFB production in 1Q22 dropped slightly or by 1% yoy and 15% qoq to 437,258MT due to production setbacks in Indonesian operations that were largely impacted by heavy rainfall and flooding in several estates that have disrupted the estate’s operations. Conversely, there was a strong recovery in Malaysian estates against a drought-induced low production a year ago.

• Outlook. The performance of the plantation segment is expected to remain steady to be supported by higher palm product prices and improvement in production. Conversely, with the reopening of the new Genting theme park and lifting of international travel restrictions, we foresee both its Johor and Genting Premium Outlets may see some recovery in line with the improvement in patronage and sales. Nonetheless, there is a high possibility of margin squeeze in the downstream segment and a slow uptake in the property segment.

• Our call. Maintain a BUY with TP of RM9.57 based on BV/share of RM5.80 and hist. 3-yrs avg. P/BV of 1.65x. We raise our FY22 earnings forecast by 16% to RM491m as we revisit our assumptions on ASP of palm products, margins, costs and expenses to be more reflective of our current and future expectations.

Source: BIMB Securities Research - 26 May 2022