1QFY22 CNP of RM18.4m is above both our and consensus’ expectations at 45% each due to higher CPO prices. FFB output at 25% and absence of DPS are as expected. Looking ahead, we anticipate sequential earnings improvement in 2QFY22 (higher FFB output and CPO prices). Raise FY22-23E CNP by 56-12% on higher CPO prices. Maintain MP with a higher TP of RM5.25 @ FY22E PBV of 0.80x (mean). ESG score is 55%.

Above our expectation. 1QFY22 registered Core Net Profit (CNP) of RM18.4m (+141% QoQ; +15x) which is deemed above both our and consensus’ estimates at 45% each mainly due to higher CPO prices. FFB output of 99k MT (+1% YoY) coming in at 25% of our estimate and absence of dividends are within expectations.

Results’ highlight. YoY, 1QFY22 registered CNP of RM18.4m (+15x; from a low base) mainly due to: (i) higher CPO/PK prices (+62%/+91%), and (ii) higher FFB output (+1%). QoQ, 1QFY22 CNP rose (+141%) on the back of: (i) higher CPO prices (+9%), (ii) higher FFB output (+19%), and lower taxation (-29%).

Sequential boost expected with higher CPO price and seasonal production improvements (peak crop). MPOB’s QTD-2QFY22 CPO price is 9% QoQ higher. Historically over the past five years, 1QFY22 FFB output accounted for ~26% of full-year production. Based on Bursa announcements, its Malaysia FFB output has started to pick up in August 2021 (+8% QoQ) and we expect the trend to continue. We are keeping our FY22 FFB growth of ~7%.

Raise FY22-23E earnings by 56-12% on higher CPO price of RM3,700- 3,200/MT from (~RM3,000/MT previously).

Maintain MARKET PERFORM with a higher TP of RM5.25 (from RM5.20) based on FY22E PBV of 0.8x. The Fwd. PBV reflects mean valuation, while at current price, it implies FY22E PER of 26.0x (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 - 24 Sep 2021