Overview. Boustead Plantation Berhad (BPB) turned to red in 3Q22 with top-line LATAMI of RM0.4mn (>100% YOY and QoQ) mainly attributed to lower production and palm product prices. This was also aided by higher operating cost of RM238.9mn (49% YoY, 1% QoQ) on account of higher manuring cost that rose to RM21.2mn against RM6.2mn in 3Q21 due to a jump in fertiliser prices. As such, EBITDA margin was less-than-inspiring or at 14.7% versus 57.4% in 3Q21 and 42.5% in 2Q22.

Key highlights. Sarawak region’s segment recorded a loss of RM8.3mn in  3Q22 (9M22: loss RM0.2mn) as compared to a profit of RM5.3mn in 3Q21  (9M21: RM11mn) as FFB production dropped by 4% YoY to 20,155 MT (-19%  YoY to 53,851 MT for 9M22) due to ageing palm profile.

Against estimates: Below. The 9M22 performance was below our estimate with core PATAMI of RM140.3mn (-10% YoY) only made up 54% of our full year forecast. The variance was due to gain on disposal of Kulai Yong land of  RM364.1mn and gain on government land acquisition of Telok Sengat Estates  of RM3.6mn recognised in 1Q22 and 2Q22.

Dividend. The Board declared a third interim DPS of 1.10sen (3Q21: 1.75sen) bringing total DPS declared to-date to 11.15sen (9M21: 4.35sen), equivalent  to a DY of 16.6% based on current market price, payable on 22 December

2022. Outlook. We see a potential downside risk to our FY22/23 earnings forecast owing to 1) low productivity due to lower yield and prolonged labour shortage issue especially for harvester, 2) higher operating costs, and 3) lower-than-expected CPO prices which could drag BPB earning – given earnings are highly correlated to ASP of palm products and production.  Our call. Maintain a HOLD call on BPB with unchanged TP of RM0.69 based on 3-year average P/B of 0.5x and FY23F BV/share of RM1.38. Pending further clarification from management, no change is made to our projection despite earnings falling short of our forecast.

Source: BIMB Securities Research - 23 Nov 2022