INVESTMENT HIGHLIGHTS

• 9MFY18 core net profit is above our expectation but meet consensus

• 9MFY18 CNP improved 18% yoy to RM1.01b

• FY18 CNP increased by 5% to RM1.10b

• Maintain NEUTRAL with higher TP of RM5.55

9MFY18 core net profit is above our expectation but meet consensus: Sime Darby Plantation Berhad Group (SIMEPLT) 9MFY18 Core Net Profit (CNP) of RM1.01b is above our expectation as it makes up 96% of our full year earnings estimate. This is caused by lower than expected operating expenses which has declined 11% yoy in 3QFY18 to RM3.37b. However, it is within consensus estimate at 77% of full year estimate. For our CNP calculation, we have excluded RM886m gain on disposals, RM67m write-offs, forex loss of RM60 and impairments of RM68m.

9MFY18 CNP improved 18% yoy to RM1.01b: The healthy earnings growth is supported by 6%yoy increase in FFB volume to 7.80m tonnes and lower lost in Liberia operations. These have more than offset the impact from lower CPO price which slipped 9% to RM2604 per tonne.

FY18 CNP increased by 5% to RM1.10b. We also increased our FY19 CNP estimate by 7% to RM1.19b. We have assumed lower operating expenses for both FY18 and FY19.

Maintain Neutral with higher TP of RM5.55. The increase in TP is in line with higher earnings estimate for FY19. Our Target Price is based on Sum-Of-Parts based valuation. Maintain NEUTRAL on the stock as we believe that the strong fundamentals of SIMEPLT have been priced in into its current Forward PE valuation of 33x for FY19.

Source: MIDF Research - 1 Jun 2018