4Q19 core net profit of RM62.6m (QoQ: +325.5%; YoY: +254.1%) took FY19 core net profit to RM140.2m (-7.7%). The results came in within expectations, at 95.1- 99.2% of our and consensus estimates. Proposed a final DPS of 9.5 sen. Should the final DPS be approved, this will bring total DPS to 13 sen for FY19 (similar to FY18). During the conference call, management highlighted that (i) FFB output growth of 5% in FY20 will be driven mainly young age profile at its Indonesia operations, and (ii) downstream segment will face tougher times ahead, due to unfavourable POGO spread, COVID-19 outbreak and import restrictions on refined palm oil from India. We lower our FY20-21 core net profit forecasts by 9.1% and 4.2%, to reflect lower FFB output assumption (for FY20-21) and lower earnings contribution from premium outlets arising from Covid-19 outbreak (for FY20). Correspondingly, our SOP -derived TP is reduced by 3.2% to RM12.41. Maintain BUY rating.

Within expectations. 4Q19 core net profit of RM62.6m (QoQ: +325.5%; YoY: +254.1%) took FY19 core net profit to RM140.2m (-7.7%). The results came in within expectations, at 95.1-99.2% of our and consensus estimates.

Dividend. Proposed a final DPS of 9.5 sen. Should the final DPS be approved, this will bring total DPS to 13 sen for FY19 (similar to FY18).

QoQ. 4QFY19 core net profit jumped 2.3x to RM62.6m (from RM14.7m in previous quarter), boosted mainly by (i) significantly higher plantation earnings (arising from improved realised palm product prices and sales volume, (ii) higher property earnings, (iii) higher downstream earnings, and (iv) improved earnings contribution from premium outlets.

YoY. 4Q19 core net profit jumped 1.5x to RM62.6m (from RM17.7m a year ago), boosted mainly by (i) higher realised CPO selling price (which has in turn resulted in plantation segment’s adjusted EBITDA doubling to RM101m), and (ii) improved earnings contribution from property and downstream segments and premium outlets.

YTD. FY19 core net profit declined by 7.7% to RM140.2m, as better performance at downstream and property segments and premium outlets were negated by lower palm product prices (recall, palm product prices only started picking up meaningfully since Oct-19).

FFB output. FFB output grew 5.3% to 2.2m tonnes in FY19, driven mainly by its Indonesia operations (arising from increased harvesting area and better age profile). Management guided that FFB output will likely grow by the same quantum in FY20, supported mainly by young age profile at its Indonesia operations.

Downstream – tougher times ahead. After registering good performance in FY19, management shared that its downstream segment will face tougher times ahead, due to unfavourable POGO spread, COVID-19 outbreak (which has resulted in weaker demand from China) and import restrictions on refined palm oil from India, which will in turn likely result in weaker sales volume and profitability at the segment.

Forecast. We lower our FY20-21 core net profit forecasts by 9.1% and 4.2%, to reflect lower FFB output assumption (for FY20-21) and lower earnings contribution from premium outlets arising from Covid-19 outbreak (for FY20).

Maintain BUY; TP: RM12.41. Post downward revision in our core net profit forecasts, we maintain our BUY rating on GENP with a lower SOP-derived TP of RM12.41 (from RM12.82 previously).

Source: Hong Leong Investment Bank Research - 27 Feb 2020