FY22 core net profit of RM483.7m (+10.9%) met our expectation, accounting for 99.8% of our estimate. Declared final DPS of 4 sen and special DPS of 15 sen (going ex on 9 Mar 2023), bringing total DPS for FY22 to 34 sen. Moving into FY23, management guided FFB output growth of 5% (which will be driven by its Indonesia estates) and flattish CPO production cost. Maintain earnings forecasts, TP of RM6.51 and HOLD rating.

Within our expectation; below consensus. 4Q22 core net profit of RM102.5m (+52.1% QoQ; -38.4% YoY) took FY22 total sum to RM483.7m (+10.9%). The results met our expectation, accounting for 99.8% of our estimate. Against the consensus, the results came in below, accounting for only 92.2%.

Exceptional items (EIs) in FY22. Core net profit of RM483.7m was arrived after taking into account of (i) RM10.3m FV change in bearer plants, (ii) RM3.1m write down and write-off, (iii) RM38.4m impairment loss on receivables, (iv) RM16.6m disposal gains, and (v) RM2.4m forex gain.

Dividend. Declared final DPS of 4 sen and special DPS of 15 sen (going ex on 9 Mar 2023), bringing total DPS for FY22 to 34 sen.

QoQ. 4Q22 core net profit surged by 52.1% to RM102.5m, due to improvements in all segments. During the quarter, adjusted EBITDA at plantation segment rose by 3.9% to RM167.6m, driven mainly by a 1% increase in FFB output and higher realised palm product prices.

YoY. 4Q22 core net profit declined by -38.4% to RM102.5m, dragged mainly by lower realised palm product prices (CPO: -9.7%; PK: -40.9%), but partly mitigated by a 2.7% increase in FFB output (as it recovered from drought-induced production stress a year ago).

YTD. FY22 core net profit rose by 10.9% to RM483.7m, helped by higher realised palm product prices (CPO: +19.0%; PK: +7.5%) and improved contribution from property segment and JVs, which altogether more than mitigated higher CPO production costs (arising from higher fertiliser and diesel costs) and lower FFB output.

5% FFB output growth in FY23. Higher rainfall (which disrupted harvesting and logistic activities) and lower harvesting area in Malaysia have resulted in FFB declining by -1.5% to 2m tonnes in FY22. Moving into FY23, management is keeping to its FFB output growth guidance of 5%, which will be driven mainly by the young age profile at its Indonesia estates, while growth at Malaysia estates will likely remain muted (as the group has earmarked another 4,000 ha for replanting).

Flattish production cost guidance in FY23. CPO production cost in FY23 will likely be flattish compared to FY22’s blended production cost of RM2,440/mt, as improved productivity will likely be offset by higher fertiliser programme (as the group only completed about 85% of its manuring programme in FY22), alongside fertiliser costs carried over at high prices from FY22.

Forecast. Maintain.

Maintain HOLD and SOP-derived TP of RM6.51. Maintain HOLD rating on GENP, with unchanged sum-of-parts TP of RM6.51 (see Figure #2).

Source: Hong Leong Investment Bank Research - 23 Feb 2023