FY21 CNP of RM28.4m is below our (84%), but within consensus’ (97%), expectation, due to lower-than-expected FFB output (91%). We expect earnings improvement in 1QFY22 (on higher FFB output, normalisation of tax expense, but flat CPO prices). Reduce FY22E CNP by 25% and introduce FY23E CNP of RM41.7m. Maintain MP with lower TP of RM5.20 @ FY22E PBV of 0.80x (mean). ESG score is 55%.

Below our expectation. 4QFY21 CNP of RM7.6m brought FY21 CNP to RM28.4m which is below our (84%), but within consensus’ (97%), estimate. The negative deviation from our estimate is due to lower-than-expected FFB output of 371k MT (+2% YoY) coming in at 91% of our estimate. FY21 DPS of 10.0 sen is close to our estimate (9.0 sen).

Results’ highlight. YoY, FY21 registered CNP of RM28.4m (vs. CNL of RM24.2m in FY20), mainly due to: (i) higher CPO/PK prices (+25%/+40%), and (ii) higher FFB output (+2%). QoQ, despite higher CPO/PK prices (+12%/+10%), 4QFY21 CNP fell (-28%) due to: (i) lower FFB output (-4%), and higher tax expense (+139%).

Stronger 1QFY22 on the cards. We expect stronger FFB growth in FY22 which should be driven by recovery in production, alongside: (i) 300 Ha maturing area in Indonesia, (ii) higher yield in Indonesia as age profile improves. Looking ahead into 1QFY22, we believe the group could register sequential earnings improvement on normalisation of tax expenses and higher FFB output, but flat CPO price. While MPOB’s QTD-1QFY22 CPO price is 3% QoQ higher at the moment, the recent plunge in prices will drag the average lower by the end of the quarter. Meanwhile, based on Bursa announcements, its Malaysia FFB output has started to pick up in March 2021 and continued to be on an uptrend in May 2021.

Reduce FY22E CNP by 25% on lower FFB output (-11%) and introduce FY23E CNP of RM41.7m.

Maintain MARKET PERFORM with a lower Target Price of RM5.20 (from RM5.30) based on rolled-over FY22E PBV of 0.8x. The Fwd. PBV reflects mean valuation, in line with peers (-0.5SD to mean). At current price, it implies FY22E PER of 26.8x (vs. peers’ 16-18x) which we think is already generous. ESG score is 55%

Risks to our call are stronger/weaker-than-expected CPO prices and higher/lower-than-expected production costs.

Source: Kenanga Research - 25 Jun 2021