Genting Plantations' 9MFY24 core earnings improved by 3.5% YoY to RM199.8m after stripping out i) net surplus arising from government acquisition (RM9.5m), ii) gains on disposal of assets (RM2.8m), iii) net FX gains (RM21.7m), iv) PPE written off (RM3m), v) impairment losses on plasma cooperative receivables (RM19.2m), and vi) minority interests. The results were below our full-year expectation but in line with the street's expectation, making up 68.8% and 72.1%, respectively. Nevertheless, we expect a strong catch-up in the 4Q, led by stronger CPO prices and lower production costs. Maintain Outperform with an unchanged SOP-based TP of RM6.81.

• 3QFY24 revenue (QoQ: -5.1%, YoY: -7.4%). The revenue dropped from RM775.8m to RM718.5m, dragged by weaker sales from plantation and downstream manufacturing segments. Plantation sales fell 2% YoY to RM613.9m due to lower FFB production recorded. 3QFY24 average CPO prices advanced from RM3,409/mt to RM3,725/mt (9MFY24: RM3,722/mt, +6% YoY) while 3QFY24 FFB production slipped 6% YoY to 543k mt (9MFY24: 1.48m mt, -3% YoY), as oil palm trees in Central Kalimantan suffered from biological tree stress while Malaysian plantation was undergoing a replanting programme. OER stood at 21.4% (9MFY24: 21.3%). Downstream manufacturing sales dipped 11.4% YoY to RM239.8m. On the other hand, property sales rose 9.9% YoY to RM32.3m, supported by stronger property sales from Batu Pahat and Kulai in Johor.
• 3QFY24 earnings slipped 18.2% YoY. Excluding the exceptional items, the group's core earnings fell 18.2% YoY to RM72.6m, dragged by all the core segments despite a turnaround in the downstream segment. Plantation pre-tax profit decreased by 3.8% YoY to RM199.6m as 3QFY24 CPO production cost was higher at RM2,450/mt vs 3QFY23's RM2,330/mt (9MFY24: RM2,710/mt vs 9MFY23's RM2,650/mt) Losses from biotechnology narrowed to RM1m with increased contributions from its biofertiliser and planting materials. Downstream manufacturing continued to see a turnaround with a small profit contribution of RM1.4m, led by improved refinery margin. Meanwhile, property earnings dropped 3.8% YoY to RM7.5m in the absence of investment property gain. Meanwhile, earnings contribution from the JV dropped from RM11.8m to RM8.7m, due to losses in the seedling business, Green World Genetics despite improved earnings contributions from premium outlets, supported by higher rental (+6% YoY).
• Outlook. Management expects FFB production to recover in the 4Q with full-year production expected to be marginally lower or flat. It also targets FFB production growth of 5% for FY25, led by production recovery in Indonesia despite flattish growth in Malaysia. FY25 CPO production cost is expected to ease from RM2,600-2,700/mt to RM2,500-2,600/mt, led by higher FFB yield and lower fertiliser cost. YTD, fertiliser application has reached 90%. Unbilled property sales stood at RM115m. Refinery remained loss-making, with biodiesel plant being profitable with capacity utilisation of 35% and 28%, respectively. Lastly, there were minimal forward sales for the CPO.

Source: PublicInvest Research - 28 Nov 2024