• GENP’s 2020 core net profit of RM240.9m (+71.9% yoy) came in above our expectations. The variance was mainly due to higher-than-expected contribution from the plantation division. Also, GENP declared a higher DPS of 15 sen, bringing its 2020 total DPS to 21 sen (2019: 13 sen), higher than our earlier expectation
• We raise our 2021-22E core EPS by 5.2%/3.9%, mainly to take into account better margins at the upstream plantation division
• Maintain BUY Rating on GENP With a New DCF-derived TP of RM10.85

2020 Core Net Profit at RM240.9m – Above Our Expectations

Genting Plantations’ (GENP) 2020 revenue was higher at RM2.5bn, up 10.2% yoy, attributable to the higher contribution from the upstream plantation and downstream manufacturing divisions, but partially offset by lower revenue from its property division. For 2020, GENP’s CPO and PK ASPs were higher by 22.6% and 28.8% yoy at RM2,511/MT and RM1,519/MT, respectively, although GENP’s FFB production declined by 4.9% yoy to 2.09m MT (attributable to the lagged effect of adverse weather conditions in 2019). GENP’s PBT (which includes forex gains and gains from disposal of assets) increased by 74.3% yoy to RM323.2m due to higher profits from its upstream plantation division. After adjusting for one-off items, the 2020 core net profit was up by 71.9% yoy to RM240.9m, coming in above our expectations; the variance to our forecast was due mainly to higher-than-expected contribution from its upstream plantation division (attributable to lower-than-expected production costs).

Sequentially Stronger, Core Net Profit Up 27.6% Qoq to RM86.7m

GENP’s 4Q20 revenue was higher by 14.5% qoq to RM739.3m while PBT increased by 94.6% qoq to RM128m. Profits was higher qoq on the back of better palm product prices and higher FFB production. GENP’s CPO ASP was at RM2,589/MT in 4Q20 (3Q20 ASP: RM2,504/MT) and FFB production increased by 11.3% qoq to 598k MT. After adjusting for one-off items, GENP’s 4Q20 core net profit was higher by 27.6% qoq to RM86.7m.

Maintaining Our BUY Rating on GENP With a New TP of RM10.85

Given the strong 2020 results, we raise our 2021-22E core EPS by 5.2%/3.9%, mainly to take into account better margins at the upstream plantation division. No changes were made to our CPO assumptions of RM2,600-2500/MT for 2021-22E. In tandem with the earnings upgrade, we raise our DCF-derived TP to RM10.85 from RM10.82, and we maintain our BUY rating on GENP.

Source: Affin Hwang Research - 25 Feb 2021