Genting Plantation (GENP) Reports 1HFY23 core net profit of RM104m, which excludes RM9m land disposal gains and RM3m of impairment, forex and fair value adjustments.
“Its 2QFY23 core net profit of RM69m was underpinned by a flat quarterly Crude Palm Oil (CPO) price of RM3,584 per MT, better Fresh Fruit Bunch (FFB) output of 0.498m MT in 2QFY23, and the sales of about RM80m in CPO inventory brought over from the previous quarters,” said Kenanga Research (Kenanga) in the recent Results Note Report.
Its upstream operation suffered losses in 2QFY23 while property earnings moderated though stayed commendable as the group’s Premium Outlets continued to perform well with footfall already surpassing pre-pandemic level and earnings approaching so.
“GENP ended 1HFY23 with net debt of RM1,065m compared to RM1,093mn a quarter ago. Disappointingly, GENP cut interim dividend from 15.0 sen a year ago to 8.0 sen for 1HFY23,” said the research house.
With both edible oil supply and demand improving almost concurrently, it is difficult to foresee a significant inventory build-up until around mid-2024, possibly beyond.
Due to this fragile supply-demand dynamics, edible oil prices (including CPO) can swing by more than usual to unexpected developments, such as weather related or supply chain disruption.
Cost pressures should ease in 2HFY23, from seasonally higher harvest, lower fertiliser and diesel prices. However, cost will remain high in 2HFY23 as GENP catches up with backlog of manuring from last year.
Palm kernel (PK) prices are also expected to stay soft for much of FY23 as global economic slowdown dampens demand harder than food-based demand for CPO.
“PK price has an impact on CPO cost because after PK is sold, proceeds are netted off against the cost to produce CPO. The group will also start construction of another Premium Outlet in Jakarta but opening will likely be in FY25,” said Kenanga.
The research house maintains the Market Perform rating and the Target Price of RM5.50. Risks to Kenanga’s call include weather impact on edible oil supply, unfavourable commodity prices fluctuations, and production cost
inflation.
