Sarawak Plantation Bhd - Stellar performance ahead
Fri, 21-Feb-2025 07:19 am
by Steven Chong • Apex Research

Counter

SWKPLNT (5135)

Target Price (RM)

2.900

Recommendation

Buy

Summary

  • SPB’s 4QFY24 CNP rose +43.2% yoy and -0.6% qoq to RM27.2m, bringing FY24 CNP at RM74.0m, which deemed above expectations, accounted to 107% of ours and consensus expectations respectively.

  • Anticipate strong earnings performance in FY25 with FFB and CPO production to hit the 400k mt (+18.5% yoy) and 125k mt (+17.9% yoy) as SPB’s palm estate is entering its high yielding age.

  • Re-iterate our BUY recommendation with a higher target price of RM2.90, based on 8.9x P/E multiple pegged to FY26F EPS of 32.5 sen.

 

Results above expectations. The Group’s FY24 CNP of RM74.0m was slightly above expectation, meeting 107% of ours and consensus estimates. The variance was mainly due to lower-than-expected operating expenses, resulting in a higher GP margin of 27% (vs our estimate of 24%). We note that CPO production declined due to lower third-party FFB purchases, however, this led to margin improvement from reduced material input costs.

 

YoY. 4QFY24 CNP increased +3.5% yoy to RM27.2m, lifted by stronger operating margin in tandem with the higher realised CPO price. On the other hand, revenue for the quarter was down -9.8% yoy to RM143.6m due to decline in CPO production from lower third party FFB purchases. 

 

QoQ. CNP rose by +24.7% qoq, on the back of strong uptick in CPO price. Revenue for the quarter, however, slid -3.7% qoq.

 

Outlook. We gather that FFB and CPO production is projected to hit the 400k mt (+18.5% yoy) and 125k mt mark (+17.9% yoy) for FY25 as SPB’s palm estate is entering its high yielding age. As a result, we anticipate the Group to deliver another strong earnings performance in FY25, further boosted by the elevated CPO prices, which are projected to reach RM4,600.

 

Earnings Revision. We have revised our earnings forecast for FY25-FY26F upward by +18.1% and +6%, respectively, to reflect the strong CPO production guidance. 

 

Valuation. Re-iterate our BUY recommendation on SPB with a higher target price of RM2.90 (previously: RM2.50), by pegging 8.9x P/E multiple to FY26F EPS of 32.5 sen and 0% ESG factored premium/discount based on three-star ESG rating.

 

Risk Subject to export duty and regulations, changing weather patterns, DMO quota in Indonesia may affect CPO supply, shortage of labours and rising operational cost.

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