Genting Plantations Earns Higher FFB Output For FY24F

Genting Plantations Berhad’s (GENP) FY23 core net profit of RM268m (ex-EI) was above CGS International’s and in line with Bloomberg consensus expectations.

CGS International (CGS), in its Company Flash Note today (Feb 29) said a total DPS of 13 sen was declared (including special DPS of 9 sen), bringing FY23 DPS to 21 sen, above the consensus estimates.

CGS International reiterates their Add rating on GENP with an unchanged hybrid-derived TP of RM6.62, implying a 21x CY24F P/E.

FY23 results above; declared special DPS of 9 sen.

Genting Plantations’ (GENP) FY23 core net profit of RM268m (excluding FV loss on biological assets and other non-core items) fell by 46% yoy due to weaker palm products prices, higher gain on disposal of investment properties for the Property segment, losses in the Agtech segment and margin deterioration for the Downstream segment.

Overall, FY23 core net profit was above CGS’s expectations but in line with Bloomberg consensus, at 117% and 97% of full-year estimates, respectively. This was due to lower-than expected operating costs in FY23 against CGS’s estimates.

GENP declared a total DPS of 13 sen (including a special DPS of 9 sen), bringing FY23 DPS to 21 sen (FY22: 34 sen), above our and Bloomberg consensus forecasts of 16 sen and 18.6 sen, respectively. This translates to a payout of 74% of FY23’s net profit.

Key takeaways from the analyst briefing on 28 Feb:

Management guided for fresh fruit bunch (FFB) production to grow by 5% yoy in 2024F, driven by higher output from its Indonesian estates as well as better weather conditions.

Management anticipates cost of production to improve in FY24F to the c.RM2,400-2,500 range from RM2,580 in FY23 amid lower fertiliser prices.

CGS reiterates Add, with an unchanged TP of RM6.62.

CGS anticipates GENP’s net profit to rebound in FY24-25F by 16-23%, driven by higher sales volumes for both plantation and timber products segments and improvement in overall costs.

They reiterate Add on GENP with a hybrid-derived TP of RM6.62 (core business based on GGM valuation and undeveloped land bank in Johor at a 50% discount to market value), implying 21x CY24F P/E. CGS deems the 21x implied P/E fair as there are minimal earnings coming through currently from its sizeable undeveloped land valued at RM4.8bn.

Potential catalysts are a recovery in profits over the next few quarters, driven by the plantation and property segments, and an increase in dividend payout.

Downside risks include lower-than-expected average CPO price and production, higher production costs, slower demand within its property segment, and negative government policies from palm oil importing countries which could impact the company’s net profit in the future.

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