Genting Plantation’s outlook seems to be intact, its trees are of average age, and production looks set to improve, is this aspect MIDF has noted a Buy call on the stock with a target price of RM8.00 from RM10.10.
The maturity age profile of the c. 117,329 ha and 18,084 ha coming into Malaysia/Indonesia estates this year, the research house anticipates group matured area to improve to 135,413 ha in 2022 resulting fresh fruit bunch yield to touch 17.3/mature ha in FY22. This would aid production to register at 2,342,645 mt/ha.
Genting Plantation oil palm planted area now stood at 159,318 in FY21, with matured registered at 134,313 ha and the immature area around 25,005 ha. The average oil palm age profile of 11.9 years of the Group, is relatively ideal in FY21 with approximately 58% prime mature and 48% past prime age, while the remaining is young mature at 12%. MIDF believes that this is a fairly matured profile that may provide visible revenue and earnings growth moving forward.
Looking at its 1QFY22 performance, the group’s revenue was slightly lower on account of the lower sales volume recognised from the downstream manufacturing segment. However, the company managed to achieve a higher ASP of CPO and PK to RM4,797/mt (+64%yoy) and RM4,114/mt (+83%yoy) during the quarter. MIDF forecast Genting Plantation to post sustained double-digit growth in PBT of 15% over FY22 as we posit cost to remain under control with 40% fertilizer and 30% labour structure as management guided, in anticipation of higher ASP CPO able to compensate rising input cost.
Earnings estimates. We revisit our assumptions and adjust our earnings forecast for FY22-23F. We believe elevated CPO price will amplify its topline to grow +24%yoy and -6%yoy to RM3.9b/RM3.7b, while the bottom-line to increase +18% and -14% to RM547.0m/RM470.9m.
Maintain BUY. Premised on the above factor, the research house is maintaining its BUY call with a revised TP of RM8.00 (from RM10.10) by pegging its FY23 EPS of 52.46sen to PER of 15x nearly -1SD of its 4-year historical forward. MIDF changed its valuation from SOP to PE since its property sales contribution is only 3% and does not offer value accretive to the company.
