Genting Plantation Off To A Shaky Start

Genting Plantation saw weak earnings for its 1QFY23 where normalised earnings narrowed by +65.5%yoy to RM41.9m in line with lower PBT achieved of RM55.6m. This the group said was due to the weaker palm product prices realized despite having a better FFB production and sales volume of refined products.

Retreat in earnings was also driven by a lower GP margin of 22% following an increased cost of production during the quarter which saw EBITDA margin depressed by 25.4ppt to 23.8%. The net earnings came in below MIDF’s and consensus ’expectations, making up 9% and 11% of full-year estimates respectively.

During the quarter, FFB production marginally rose to 457 Mt (+4.6%yoy) as a result of improved weather apart from no signs of palm tree stress. FFB Production is expected to pick up and achieve +5% to 9% growth for CY23 as the sector heads toward productive months. Nonetheless, average CPO and PK realised prices remain supported at RM3,585/Mt (-25.3%yoy) and RM1,983/Mt (-51.8%yoy) level respectively, buoyed by lower palm oil production, lower inventory levels in Indonesia and Malaysia.

Tracking weaker ASP CPO realised, the plantation profit has now down to RM53.0m while margins were squeezed by 14.9% (-36.2ppt). Meanwhile, the downstream segment posted a higher topline of RM210.4m (+37.8%yoy) attributable to better sales volume.

As for earnings estimates, the management reiterates that production will experience some catch-up later in 2HFY23, coming from the Indonesia area\ as a result of no DMO policy extension and favourable weather circumstances. Aside from that, Premium Outlet’s footfall traffic has nearly returned to pre-pandemic levels, and this segment would aid earnings
stability ahead.

The house maintains a NEUTRAL call on the stock with an unchanged TP of RM6.16. During the results briefing, management indicates that the shortfall of harvesters remains negligible or below 5% of the total requirement, keeping estate productivity stable.

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