Boustead Plantations Bhd took center stage during morning trading on Friday, June 9, as its shares surged by as much as 21.09% or 13.5 sen to reach 77.5 sen, accompanied by active trading activity.
Boustead Plantations emerged as one of the top gainers in terms of value on Bursa Malaysia. By noon break, the stock had slightly retraced its gains to 75.5 sen, still reflecting a notable increase of 17.97% or 11.5 sen.
This upward movement translated into a market capitalization of RM1.69 billion. The trading volume stood at 14.39 million units, exceeding its 200-day average volume of 3.33 million shares by more than four times.
Year to date, the stock has exhibited a strong rally of 20% or 12.5 sen, starting from 63 sen on January 3 of this year. However, in comparison to the previous year, the stock has experienced a decline of 19%, dropping from 93 sen.
When contacted, Rakuten Trade Sdn Bhd Vice President of Equity Research Thong Pak Leng highlighted that investors were drawn to Boustead Plantations due to its perceived undervaluation. The stock is currently trading at a price-earnings ratio (PER) of 10 times.
In the first quarter ended March 31, 2023 (1QFY2023), Boustead Plantations witnessed a significant decline in net profit, plummeting by 98.8% to RM5.22 million or 0.23 sen per share. This decline was attributed to the adverse impact of fresh fruit bunches (FFB) valuation and a substantial drop in palm product prices.
In contrast, the group had achieved a net profit of RM435.16 million or 19.43 sen per share in 1QFY2022, primarily driven by a gain of RM364.1 million from the disposal of 664 hectares of plantation land in Johor.
The company declared a first interim dividend of one sen per share, scheduled to be paid on June 23. Noorhayati Maamor, an analyst at BIMB Securities Research, commented on Boustead Plantations’ latest earnings, stating that the group’s profit after tax and minority interests (Patami) of RM5.2 million fell below both the research house’s and consensus expectations.
These figures accounted for only 4% and 5% of their respective full-year earnings forecasts. Looking ahead, it is anticipated that core earnings will continue to decline in the second half of the year due to an expected decrease in palm product prices coupled with rising costs, Noorhayati added.
In light of the challenging business outlook, BIMB Securities Research revised its earnings forecast for FY2023 and FY2024 to RM56 million and RM32 million, respectively, down from the previous estimates of RM119 million and RM47 million.
In FY2022, Boustead Plantations achieved an annual net profit of RM595.31 million, more than doubling the RM241.29 million recorded in FY2021, primarily driven by gains from land disposals.
Following the release of the company’s earnings, Noorhayati downgraded BIMB Securities’ recommendation for Boustead Plantations to “sell” from “hold” and adjusted the target price to 65 sen, down from 69 sen.
“Hence, we advise investors to take any stock price rally as an opportunity to lock-in their profit,” Noohayati added.
