Overview. Boustead Plantation Berhad (BPB) returned to the black in 4Q22 with core PBT of RM18.9mn (>100% QoQ) driven by higher FFB and CPO production, competitive manuring cost and lower impact on adverse FV movement of FFB. Nonetheless, core PBT dropped by 86% YoY as revenue declined 23% YoY to RM264mn no thanks to lower palm products prices and higher operating cost (+41% YoY) as a result of an increase in fertiliser, diesel prices and new minimum wage. As such, core PBT margin was less-thaninspiring or at 7.2% versus 40.2% in 4Q21. The variance in core profits was due to gain on disposal of assets in 1Q22, 2Q22 and 3Q22 including 1) gain on disposal of Kulai Yong land of RM364.1mn, 2) gain on government land acquisition of Telok Sengat Estates of RM3.6mn and 3) gain on disposal of Bukit Mertajam land of RM91mn.

Key highlights. Sarawak segment continued to record a loss of RM3.7mn in 4Q22 (FY22: loss RM3.9mn) versus a profit of RM5.6mn in 4Q21 (FY21: RM16.6mn) as FFB production dropped by 5% YoY to 18,308 MT (-16% YoY to 72,159 MT for FY22). This was mainly hampered by ageing palm profile.

Against estimates: Inline. The FY22 performance came broadly inline with our estimate with core PATAMI of RM137mn (-43% YoY) making up 106% of our full year forecast.

Dividend. The Board declared a fourth interim DPS of 3.30 sen (4Q21: 4.0sen) bringing total FY22 DPS to 14.45sen (FY21: 8.35sen), equivalent to a yield of 20.9% based on current market price, payable on 22 March 2023.

Outlook. We maintain our FY23/24 earnings forecast at this juncture. We see potential downside risks to our earnings however estimates owing to 1) low productivity due to lower yield and prolonged labour shortage issue especially for harvester, 2) higher operating costs, 3) lower than-expected CPO prices realised which could drag BPB earnings - given earnings are highly correlated to ASP of palm products and production, and 4) fail to monetise plantations landbank in Sarawak.

Our call. Maintain HOLD call on BPB with unchanged TP of RM0.69 based on 3-year average P/B of 0.5x that is pegged to FY23F BV/share of RM1.38.

Source: BIMB Securities Research - 22 Feb 2023