Period  4Q13/ FY13

Actual vs. Expectations  FY13 core net profit* of RM3.47b is better than expected, ahead of consensus estimate (RM3.26b) by 6% and ours (RM3.05b) by 13%. We believe the stronger-than-expected earnings were due to better-than-expected performance from its industrial and property divisions.

 Industrial division made a strong comeback in 4Q13 where its EBIT grew 40% QoQ to RM365m. We gathered that 4Q13 benefited from stronger sales delayed earlier in 3Q13 due to the flood in Queensland, Australia.

 Property division also performed very well in 4Q13 with its EBIT doubling QoQ to RM275m on strong demand for its industrial lots in Taman Pasir Putih (Pasir Gudang, Johor) and Elmina East (Shah Alam, Selangor).

Dividends  In line with its better-than-expected earnings, a final single tier dividend of 27.0 sen was declared, which is better than our expectation of 19.0 sen. A dividend reinvestment plan (DRP) was also proposed.

Key Results Highlights  YoY, FY13 core net earnings declined 15% to RM3.47b as average CPO prices tumbled 21% to RM2317/mt. However, sterling performance from the property division (EBIT +21% RM523m) cushioned the drop.

 QoQ, 4Q13 core net earnings surged 63% to RM1.07b due to superior growth seen in the industrial division (EBIT +40% to RM365m) and property division (EBIT +100% to RM275m).

Outlook  Despite the strong performance from its nonplantation division, current low CPO prices will likely result in weak earnings from its plantation division. Hence, we only expect FY14E core net earnings growth of 2% YoY to RM3.53b.

Change to Forecasts  Maintain FY14E-FY15E core net earnings of RM3.53b-RM3.84b. Although we have reduced our CY14E CPO prices to RM2400, we have also increased our sales assumption for both industrial and property divisions. Net impact is unchanged forecast earnings for both FY14E and FY15E.

Rating   Maintain MARKET PERFORM

Valuation  Maintain our TP of RM9.80 based on Sum Of Parts.

Risks  Lower than expected CPO prices.

Source: Kenanga