United Malacca - OUTPERFORM - 28 June 2012

Period    4Q12 and FY12

 

Actual vs. Expectations

 Broadly in line, FY12 net profit of RM85.9m made up 88% of the consensus forecast of RM97.5m and 92% of our forecast of RM93.0m.

 FFB production is 6% below our expectation as the tree stress impact has been greater than expected.

 Fertilizer cost has also turned out to be higher than expected.

Dividends   A final dividend of 16 sen was announced (single tier, ex-date 12th of Sept 2012). Together with the interim dividend of 10 sen announced earlier, the total net dividend in FY12A is 26 sen (dividend yield of 3.6%).

Key Results Highlights

 YoY, FY12 net profit increased 5% to RM85.9m due to a better FFB production (+11% YoY) and better CPO prices (+6% YoY).

 YoY, 4Q12 net profit declined 46% to RM12.3m due to higher fertilizer costs and a lower FFB production caused by the tree stress impact.

 QoQ, 4Q12 net profit decreased 42% to RM12.3m as a result of lower FFB production seasonally.

Outlook   Fertiliser cost increase should moderate in FY13E.

Note that crude oil prices have softened to an average of US$93.50/barrel per barrel in 2QCY12 (vs. 1QCY12: US$103/barrel).

Change to Forecasts

 FY13E-FY14E earnings cut by 5%-4% respectively to RM111m-RM114m.

 FFB volume for FY13E-FY14E has been reduced by 2%-1% respectively to account for tree stress.

 Assuming now higher fertiliser costs for both FY13E-FY14E by 3%-5% respectively.

Rating  Maintain OUTPERFORM

 UMCCA net dividend yield of 4.5% is the highest among planters under our coverage.

 The average age profile of ~8 years old means the strong FFB growth can be sustained.

Valuation    We have lowered our Target Price to RM7.70 (from RM8.00) based on an unchanged 14.1x Fwd PER on a lower FY13E EPS of 54.5 sen (previously 57.3 sen).

Risks   Sustained drop in CPO prices.

 Higher than expected fertiliser costs.

Source: Kenanga