United Malacca’s financial results in the first half of financial year 2024/25 beat market expectation as core net profit (CNP) in the second quarter rose owing to better harvest, firmer Crude Palm Oil (CPO) prices and lower costs, noted Kenanga Investment Bank Bhd (Kenanga Research) in a research note dated Dec 20. (FY2024/25: Financial year ending 30 April 2025)
Kenanga Research has maintained the OUTPERFORM call for United Malacca and has kept the target price at RM6.30, reflecting an RM1.20 premium over market valuation.
As at 10:49am Dec 20, United Malacca’s stock traded at RM5.10. (Stock updates from Bursa Malaysia)
According to a financial document filed with Bursa on Dec 19, in the first six months of FY2024/25, profit after tax totalled at RM41.5 million (RM41,502,000), growing by 171.0% year-on-year (YoY), from RM15.3 million (RM15,312,000) in the previous year. Six-month revenue amounted to RM347.3 million (RM347,324,000), which increased by 23.8% YoY from RM280.5 million (RM280,462,000).
For the quarter ended 31 October 2024, the group reported a profit after tax amounting to RM30.4 million (RM30,424,000), which represented an increase of 127.8% year-on-year (YoY), from RM13.4 million (RM13,356,000) recorded in FY2023/24. Quarterly revenue rose 26.9% YoY to RM183.4 million (RM183,444,000), from RM144.5 million (RM144,509,000) a year earlier.
During the first-half of the current financial year, a dividend of 5.0 sen (flat YoY) was declared in Nov. Kenanga Research has also kept the full-year dividend per share (DPS) at 12.0 sen for FY2024/25 and FY2025/26).
Group net cash holding continued to improve, from RM48 million in the first quarter to RM80 million in the second quarter.
The second half (Nov 2024-Apr 2025) earnings of United Malacca are expected to remain positive as robust palm oil prices offset rising minimum wages, noted Kenanga Research.
Analysts have also revised upward the CNP for FY2024/25 by 7% to RM81.9 million in view of the strong first-half performance and firm CPO price outlook, while keeping the CNP for FY2025/26 unchanged at RM84.0 million.
After suffering losses in the first quarter (May-July 2024) due to unusually poor yields, the Indonesian operations reverted into profits again in the second quarter (August-October 2024) due to recovering yields after earlier floods affected operations, larger planted area, up from about 8,000 hectares (ha) to about 11,000 ha YoY, and lasty, improving FFB (Fresh Fruit Bunch) yields as a third of its Indonesian area are still maturing into higher yielding age-bracket. With an average age of about ten year, the Indonesian operations will be key in nudging group profits moving forward as United Malacca embarks on replanting about a third of its Malaysian estates (17-year average age) over the next 3−5 years.
Underpinned by the prospect of another year of global edible oil deficit hence declining inventory, United Malacca should be able to enjoy average CPO price of around RM4,000 per metric tonne (MT) over FY2024/25 and FY2025/26. Unit CPO cost should also ease slightly as improving FFB output (notably from recovering Indonesia yields) and firm CPO prices will help offset higher minimum wages in Malaysia (13.3%) and Indonesia (6.5%).
