FY20 CNP of RM238.5m (+70% YoY) is above our (108%), but within consensus’ (98%), expectation due to higher CPO price. FY21E FFB growth is guided at 5-8% (in line with our +5%), but downstream will remain challenging. 1QFY21 earnings should remain strong (CPO: +13% QoQ). That said, segment-wise, weaker downstream will be overshadowed by stronger upstream. Tweak FY21E CNP higher by 1% on higher CPO price, but downstream weaker. Maintain MARKET PERFORM with a lower SoP-derived TP of RM9.50. Current price implies FY21E PER of 26.7x (c.13% premium to peers) which we think offers limited upside.

FY20 above ours, within consensus. Genting Plantations Berhad (GENP)’s 4QFY20 core net profit (CNP) came in at RM84.6m, bringing FY20 CNP to RM238.5m (+70% YoY) which is above our (108%), but within consensus’ (98%), estimate due to higher CPO price. FY20 FFB output of 2.09m MT (-5% YoY) is spot on with our estimate, but FY20 DPS of 21.0 sen, surprised us (vs. our expected 14.0 sen) due to special dividend of 11.0 sen.

Results’ highlight. YoY, higher CPO/PK price (+23%/+29%) overshadowed the decline in FFB output (-5%). This led to a 151% increase in plantation segmental profit, outstripping: (i) a 54% decline in downstream segmental profit, and (ii) a 44% decline in property segmental profit. As a result, FY20 CNP rose (70%) to RM238.5m. QoQ, 4QFY20 CNP rose (+25%) mainly as plantation segmental profit rose (+100%) on higher CPO/PK price (+3%/+22%) and FFB output (+11%).

Management is guiding FY21 FFB growth at 5-8%, in line with our 5% forecast. Growth will be driven by Indonesia (younger trees) as c.4k Ha is expected to be replanted in Malaysia. Meanwhile, downstream segment is still expected to remain challenging due to: (i) Indonesia refineries’ advantage over Malaysia (biodiesel levy and export tax structure), and (ii) the wide POGO spread of c.USD452/MT, affecting discretionary biodiesel blending. Having said that, better upstream segment’s performance on higher CPO price is expected to negate the impact of other weaker segments. Premised on higher CPO price (QTD 1QFY21: +13% QoQ), we expect 1QFY21 earnings to remain strong.

Tweak FY21E CNP higher by 1% on higher realized CPO price of RM2,700/MT, but reduce refinery utilization to 65% (from 75%). Introduce FY22E CNP of RM341m.

Maintain MARKET PERFORM with a lower SoP-derived Target Price of RM9.50 (from RM10.00). At current price, it implies a FY21E PER of 26.7x (13% premium to large-cap IOICORP and KLK). The premium could be due to GENP’s sensitivity towards CPO price (upstream – c.80% of earnings), especially during high CPO price environment. However, current valuations are unattractive, warranting a MARKET PERFORM call due to GENP’s: (i) premium to large-cap peers despite absence of FBMKLCI status, and (ii) lower liquidity compared to its large-cap peers.

Source: Kenanga Research - 25 Feb 2021