Period 1Q12.
Actual vs. Expectations
The results were
below expectations due to a higher-than-expected fertilizer cost and a
lowerthan-anticipated palm kernel prices. The 1Q12 core net profit of RM69m*
made up only 15% of the consensus’ forecast of RM466m and 14% of our forecast
of RM495m.
Fertiliser cost
surged in 1Q12 while palm kernel prices tumbled 36% YoY to RM1,941 per mt. GENP
also applied a higher usage of fertiliser in 1Q12 due to the wet weather.
Dividends No dividend was announced as expected.
Key highlights
YoY, the earnings
declined 16% due to a higher fertiliser cost and usage coupled with
significantly lower palm kernel prices at RM1,941 per mt (-36% YoY).
QoQ, the earnings
dropped by 16% due to a seasonally lower FFB production in 4Q12 of 275k mt
(-25% QoQ).
Outlook The
fertiliser cost should normalise in 2H12 in line with the lower crude oil
prices so far in 2Q12. However, on a YoY basis, the fertiliser cost in FY12E
will still be higher by 20%.
2H12 results should
improve as an additional 10k-12k mt of FFB will come in after completion of the
JV with Global Agrindo Investment (GAI) in end-2Q12.
Indonesian estates
FFB should grew 6% YoY. This should cushion the increase in cost and the lower
palm kernel prices.
Change to Forecasts
We have revised down
our FY12-13E net profits by 8%-9% to RM455m-RM491m as we have assumed a higher
fertiliser cost growth (YoY) of 20% (against 10% previously).
After accounting for
the lower palm kernel prices, our overall cost of production for CPO in FY12-13E
has been increased by 17%-19% to RM1,160-RM1,150 per mt.
Rating Maintain OUTPERFORM
Long term growth
prospect remain intact. Post JV with GAI, GENP will be able to speed up their planting
by additional 10k ha per year.
Valuation We have lowered our target price by 7% to RM9.90
(previously RM10.70). Our valuation is based on an unchanged 16.5x Fwd. PER on
the lower FY12E EPS of 60.0 sen (from 65.3 sen).
Risks A
sustained decline in CPO prices.
Source: Kenanga
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