Period  1Q15

Actual vs. Expectations UMCCA’s 1Q15 core net profit of RM12.7m was below both the consensus and our expectations. It made up 15% of the consensus FY14 forecast (RM87.0m) and 18% of ours (RM72.0m). In our view, the difference may be caused by steeper cost of sales which increased 27% YoY to RM39.7m which we think could be caused by higher-than-expected fertilizer prices.

Dividends  None as expected.

Key Results Highlights YoY, 1Q15 CNP improved 54% to RM12.7m as CPO prices increased 6% to RM2485/MT while FFB volume was up 10% to 80,641 MT.

 QoQ, CNP declined 26% to RM12.7m due to lower CPO prices (-8% to RM2485/MT).

Outlook  Outlook for FY15 is neutral. On the positive side, management expect additional 852 ha of landbank to reach maturity this year. However, it also mentioned that prevailing bearish sentiment in vegetable oil markets will affect its earnings.

Change to Forecasts FY15E CNP is reduced by 5% to RM68.6m while FY16E CNP is trimmed by 4% to RM80.2m as we assumed higher fertilizer prices.

Rating Maintain MARKET PERFORM

Long-term growth for UMCCA is intact as 92% of its palm trees are still below 15 years old. However, the near-term outlook is unexciting and we expect flat FY15E earnings growth.

Valuation  We reduce our Target Price to RM7.15 (from RM7.50) based on unchanged Fwd. PE of 20.4x on lower CY15E EPS of 35.1 sen (previously 36.8 sen).

Risks to Our Call Lower-than-expected CPO prices.

 Lower-than-expected FFB volume.

Source: Kenanga