Results

• Above expectations… 4Q17 core net profit of RM25.3m (qoq: +0.4%; yoy: +105.8%) took FY17 core net profit to RM73.9m (+66.8%). The results beat expectations, surpassing consensus and our forecasts by 14.7-17.7%.

Deviations

• Reversal of income tax expense in 4QFY17 (arising from availability of new planting tax allowances).

Dividend

• Declared 2 nd interim DPS of 12 sen and special DPS of 3 sen (ex-date: 24 Jul 2017), bringing total DPS for the full year to 23 sen (translating to dividend yield of 3.8%), higher than total DPS of 16 sen we projected.

Highlights

• QoQ… Despite seasonally weaker FFB production and lower ASP for PK, 4QFY17 core net profit rose marginally (by 0.4%) to RM25.3m, and this was due mainly to the reversal of income tax expense (arising from availability of new planting tax allowances).

• YoY… 4QFY17 core net profit doubled to RM25.3m (from RM12.3m a year ago), due mainly to: (1) a 49.2% jump in total FFB production (arising from FFB yield recovery in Malaysia and larger harvesting areas in Indonesia); (2) Higher palm product prices; and (3) Reversal of income tax expense.

• FY17 core net profit rose 66.8% to RM73.9m, boosted by higher FFB production (+9.2%, resulted from FFB yield recovery in Malaysia and larger harvesting areas in Indonesia) and higher palm product prices.

Risks

• (1) Slower-than-expected FFB output recovery; (2) Higher than-expected production cost (in particularly, fertiliser costs); and (3) sharper-than-expected fall in palm product prices.

Forecasts

• Maintained for now, pending further update with management.

Rating

BUY ( ↔ )

• We continue to like UMB for its: (1) Strong FFB output growth prospects; (2) Healthy balance sheet; and (3) Decent valuations among peers.

Valuation

• Maintain TP of RM7.11 based on 20x CY2018 core EPS of 35.6 sen.

Source: Hong Leong Investment Bank Research - 23 Jun 2017