Period  3Q13/9M13

Actual vs. Expectations  UMCCA’s 9M13 net profit of RM59.0m was within both the consensus and our expectations. It made up 78% of the consensus FY13 forecast of RM76.0m and 79% of our forecast of RM75m.

Dividends  As expected, no dividend was announced.

Key Results Highlights  YoY, the 9M13 net profit declined 20% to RM59.0m due to lower CPO prices* (-16% to RM2617/mt). A better FFB production at 272,309 mt (+17%) mitigated the earnings decline.

 QoQ, the 3Q13 net profit weakened by 33% to RM16.1m as CPO prices dropped by 16% to an average RM2172/mt and FFB production slowed down by 5% to 97,515 mt.

Outlook  The current low CPO prices will limit the earnings growth excitement. However, the strong FFB growth of 19% in FY13E should mitigate the earnings fall to a certain extent.

Change to Forecasts  Our FY13-14E earnings forecasts of RM75.3mRM84.8m remain unchanged.

 Our key assumptions are CY13-14E average CPO prices of RM2500-RM2700 per mt. We have assumed FY13-14E FFB productions at 337k-349k.

Rating   Maintain MARKET PERFORM

 We expect FY13E earnings to decline by 12% YoY and this should keep the share price upside limited. However, UMCCA’s decent dividend yield of 3.0% should provide some support to its share price.

Valuation  Maintaining our Target Price of RM6.70 based on CY13E PER of 16.7x (+0.5 SD above the 5-year mean, implying a premium to its peers due to its double-digit FFB growth and its above-peer dividend payout of ~60%).

Risks  Lower than expected CPO prices.

Source: Kenanga