SD Plantation delivered higher 1H FY18 revenue due to a stronger contribution from both its upstream and downstream operations. Core net profit of RM771m (+23.2% yoy) was largely within our expectations. As such, we leave our FY18-20E core EPS unchanged given there was no major surprise in SD Plantation’s results. We maintain our HOLD call and TP of RM5.35, based on 25x CY18E PER.

1H FY18 Core Net Profit Increased 23% Yoy to RM771m

SD Plantation’s 1H FY18 revenue rose by 13.1% yoy to RM7.63bn due to an increase in contribution from both upstream and downstream plantation businesses. In 1H FY18, SD Plantation’s FFB production was higher by 12% yoy to 5.46m MT, while CPO ASPs were RM2,672/MT (vs. 1H FY17 CPO ASP of RM2,739/MT). The fall in ASP was partly attributable to a post El Nino FFB production recovery that resulted in high CPO inventories for Malaysia towards end-2017. SD Plantation’s PBT for 1H FY18 more than doubled yoy to RM1,876m, mainly attributable to the gain on disposal of the Malaysian Vision Valley (MVV) land to SD Property for RM689.6m. After excluding for one-off items, 1H FY18 core net profit climbed by 23.2% yoy to RM771m, which accounts for 54% and 56%, respectively, of our and consensus FY18E earnings. This came in within our expectations.

Stronger Sequentially

Sequentially, SD Plantation’s 2Q FY18 revenue increased by 15.4% qoq to RM4.09bn. EBITDA margins also improved by 1.4ppt qoq to 24.8%, mainly due to better margins in the upstream division. 2Q FY18 core net profit, after excluding one-off items rose by 49.5% qoq to RM462m. An interim dividend of 3.5 sen was declared by SD Plantation for the quarter.

Change in Financial Year End to December Starting From June

SD Plantation announced that the group will change their financial year end from 30 June to 31 December, which is to be implemented after the close of the financial year ending 30 June 2018. The next results of SD Plantation will be for the 6 months period, from July to December 2018.

Source: Affin Hwang Research - 23 Feb 2018