9MFY21 CNP of RM285.3m (+85% YoY) is above our (76%) and consensus’ (74%) expectations, in anticipation of a stronger 4QFY21 as weaker FFB is overshadowed by higher CPO prices, lower fertilizer application, and premium outlets’ recovery. Management is guiding FY22 FFB growth of 5-8% (vs. our 8%). Raise FY21E CNP by 10%. Maintain OUTPERFORM with an unchanged TP (SoP-derived) of RM8.40).

Above expectations. Genting Plantations Berhad (GENP)’s 9MFY21 core net profit (CNP) came in at RM285.3m (+85% YoY). This is deemed above both our and consensus’ estimates, at 76%/74% of full-year estimates, in anticipation of earnings improvement in 4QFY21. However, 9MFY21 FFB output of 1.50m MT (+1% YoY) disappointed at 68% of our full-year estimate. Absence of DPS is as expected.

Results’ highlight. YoY, 9MFY21 CNP rose (+85%) propelled by a 141% improvement in plantation segmental profit on the back of higher average CPO/PK prices (+31%/+59%) and FFB output (+1%). QoQ, despite 8% improvement in CPO price, 3QFY21 CNP fell (-17%) on: (i) lower PK prices (- 7%), (ii) lower FFB output (-1%), and (iii) weaker property division (-89%).

FFB growth hiccup. With 10MFY21 FFB growth at -1%, our initial growth estimate of 5% is unachievable. However, FY22 FFB output is expected to recover, with management guiding growth of 5-8% (in line with our 8% estimate). While 4QFY21 FFB output could slip further, we expect sequential earnings improvement premised on: (i) higher CPO prices (MPOB- QTD4QFY21: +17% QoQ), (ii) premium outlets’ recovery, and (iii) lower cost from lower fertilizer application.

Raise FY21E CNP by 10% on higher CPO prices of RM3,400/MT (from RM3,000/MT), but lower FY21E FFB production growth to -4% (from +5%).

Maintain OUTPERFORM with an unchanged SoP-derived TP of RM8.40. Our TP implies FY22E PER of ~20x (-1.25SD from mean). We think aside from 4QFY21 earnings improvement, GENP offers a reopening angle play in the form of its premium outlets. Strong footfall from the eventual new Genting theme park could also be a catalyst. ESG score is at 77%.

Risks to our call include: (i) lower-than-expected CPO prices, (ii) prolonged lockdowns, and (iii) a precipitous rise in labour/fertiliser/transport and other cost.

Source: Kenanga Research - 25 Nov 2021