Period 2Q12 and 1H12
Actual vs. Expectations
The 1H12 core net profit of RM145m came in below the consensus expectations but was in line with ours. It made up only 34% of the consensus’ FY12 forecast of RM426m and 41% of our forecast of RM358m.
We believe the consensus may have underestimated the severity of the tree stress effect in 1H12, which has caused a deeper than expected slump in the FFB production. Note that we had lowered our FFB production estimate to 1.31m mt in our plantation sector downgrade call earlier this month.
Dividends As expected, an interim dividend of 4.25 sen (less 25% tax) has been declared. This is the same as last year.
Key Results Highlights
YoY, the 1H12 core net profit declined 37% to RM145m as average CPO prices fell 9% to RM3193/mt while the FFB volume dropped 13% to 551,256 mt.
QoQ, the 2Q12 core net profit improved 6% to RM75m as the CPO prices rose 1% to RM3206/mt and given the better property division’s EBIT (+27% to RM9m). However, the reported net profit was lower (-11%) in the absence of the one-off gain of RM10m from a plantation land sale in 1Q12.
Outlook 2012 should be a challenging year for most pure planters (including GENP) as their earnings are unlikely to repeat their FY11 supernormal profits due to lower FFB and lower CPO prices.
However, the long term outlook remains positive as the 5-year FFB CAGR of 6% is sustainable as its Indonesian estates mature.
Change to Forecasts
Maintaining our FY12-13E earnings of RM348mRM447m based on FFB productions of 1.31m-1.55m mt and avg. CPO price assumptions of RM3150-RM3100.
Rating Maintain MARKET PERFORM
The flattish CPO prices outlook for FY12E at RM3150/mt (-2% YoY) should keep GENP share price upside limited.
Valuation Maintaining our TP of RM9.70 based on FY13E PER of 16.5x (+1SD from the 5-year average PER).
Risks Sustained CPO prices below RM3000/mt.
Lower than expected margin from the property division.
Source: Kenanga
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