Period     3Q13/9M13

Actual vs. Expectations     The 9M13 core net profit* of RM1.26b was within expectations as it made up 76% of the consensus forecast (RM1.67b) and 78% of ours (RM1.62b).

Dividends    As expected, no dividend was announced.

Key Results Highlights      YoY, the 9M13 core net profit declined 15% to RM1.26b as CPO prices tumbled 21% to RM2470/mt. However, this was mitigated by a FFB growth of 7% to 2.71m mt and better earnings from the nonplantation divisions.

QoQ, the 3Q13 core net profit gained 9% to RM479m due to improved earnings from property development (EBIT rose +32% to RM161m) and the downstream division (EBIT rose +33% to RM220m). These two factors were enough to counter the lower earnings from the plantation division (EBIT fell -32% to RM191m).

Outlook    Low CPO prices should limit the share price upside. However, the proposal to list its property division should keep the share price supported.

Change to Forecasts     We have increased our FY13 net income estimate by 4% to RM2.05b to account for the RM78m revaluation gains. However, our FY13E-FY14E core earnings estimates are left unchanged at RM1.62b-RM1.72b.

Rating  Maintain MARKET PERFORM

Valuation     Maintaining our TP of RM5.40 based on an unchanged Fwd. PER of 18.1x to CY14E EPS of 29.8 sen.

Risks    Worse than expected CPO prices.

Lower than expected downstream margin.

Lower than expected earnings from the property division.

Source: Kenanga