United Plantation Berhad - In-line with expectations
Thu, 14-Nov-2024 07:13 am
by Steven Chong • Apex Research

Counter

UTDPLT (2089)

Target Price (RM)

28.40

Recommendation

Hold

Summary

  • UPL recorded CNP of RM183.2m (-27.9% yoy, -1.2% qoq), bringing 9MFY24 CNP to RM529.2m (+13.9% yoy) which was within expectations, constituting 70% of our full-year forecast.

  • Raised our FY24F/FY25F CNP higher by +2.5%/+5.3% as we revised upward our FY24F/FY25F CPO ASP assumption from RM4,000/RM3,900 to RM4,100/RM4,200. 

  • Maintained our HOLD recommendation with a higher TP of RM28.40 (previously RM27.45) based on forward PE multiple of 15.7x and FY25F EPS of RM1.81.

 

Company Update

  • Results review. United Plantations’ 3QFY24 CNP after excluding one-off adjustment of RM31.8m (forex gain: RM6.8m; FV gains on contracts: RM36.8m; and realised losses on futures contract: RM12.1m) stood at RM183.2m, fell -27.9% yoy on. Revenue registered at RM547.7m, grew +1.4% yoy and +0.3% qoq.

     

  • Within expectations. The Group’s 9MFY4 CNP at RM529.2m was within our expectations at 70% of our full year forecast of RM744.3m. We foresee earnings to accelerate in 4Q24 given the strong upswing in CPO prices. 

     

  • Operations Highlights. Cumulatively, revenue from the plantation segment remained unchanged, with a modest increase of +0.7% yoy despite recording higher CPO and PK average selling prices. This was mainly due to the impact of the dry weather spell on CPO production, as reflected in the -10.6% yoy decline in production in 3QFY24. Meanwhile, revenue from the refinery segment saw an increase of +10.4% yoy, in line with the higher ASP but earnings contribution has decline -11.8% yoy, dragged by tepid global demand.

     

  • Industry Highlights. Looking ahead, expect CPO to remain elevated until 1Q25 on the back of seasonally higher demand for palm oil towards year-end. While CPO prices are likely to stay high in the coming months, we believe this may not be sustainable as production from Indonesia is expected to normalise next year in absence of the influence of El Nino.

     

  • Declared interim and special dividend of 60 sen per share. We are anticipating a dividend payout of 90 sen per share in next quarter, bringing, total dividend for FY24 to RM1.50 per share, which implies a decent dividend yield of 5.2% based on the current share price of RM29.64.

     

  • Valuation. Revised our CNP forecast for FY24/25 higher by +2.5%/+5.3% as we adjust our full-year CPO ASP assumptions from RM4,000/RM3,900 to RM4,100/RM4,200. We maintained our HOLD recommendation with a higher TP of RM28.40 (previously RM27.45) based on forward PE multiple of 15.7x and FY25F EPS of RM1.81.

     

  • Risk. EU export ban and regulations, changing weather patterns affect FFB production, taxation and export ban in Indonesia threatens local CPO demand, shortage of labours and rising operational cost.

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Opinions, estimates and projections in this report constitute the current judgment of the author. They do not necessarily reflect the opinion of Apex Securities Berhad and are subject to change without notice. Apex Securities Berhad has no obligation to update, modify or amend this report or to otherwise notify a reader thereof in the event that any matter stated herein, or any opinion, projection, forecast or estimate set forth herein, changes or subsequently becomes inaccurate.

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