Genting Plantations rises after posting strong 3Q earnings

KUALA LUMPUR (Nov 26): Genting Plantations Bhd’s share price climbed as much as 19 sen or 1.94% to RM9.99 so far today — after announcing that its third-quarter earnings grew over three times.

At 10.57am, the stock had pared some gains at RM9.95, still up 15 sen or 1.53%. It was among the top gainers this morning.

CGS-CIMB Research analyst Ivy Ng said in a note today Genting Plantations’ results for the cumulative first nine months ended Sept 30, 2020 (9MFY20) were above her expectations as higher-than-expected crude palm oil (CPO) prices trumped weaker-than-expected output.

“We expect the group’s 4QFY20 earnings (for the quarter ending Dec 31, 2020) to improve quarter-on-quarter on the back of higher fresh fruit bunch (FFB) production and better CPO prices (the current CPO price of RM3,451 is above the 9MFY20 average).

“The group expects production of its Indonesian estates to peak in 4QFY20. We expect the combination of higher production quarter-on-quarter and prices to lift 4QFY20 earnings,” she said.

Ng also raised her FY20 earnings forecast to RM239 million to reflect stronger earnings for Genting Plantations.

She maintained her “buy” call for the stock, but revised up her target price (TP) to RM10.90 from RM10.70.

Affin Hwang Capital analyst Nadia Aquidah, meanwhile, also said in a note Genting Plantations’ 9MFY20 core net profit of RM154.4 million came in slightly above her expectations mainly due to a higher-than-expected contribution from the plantation division.

“We raise our FY20/21 core earnings per share (EPS) [forecasts] by 3.4%/1.4%, mainly to take into account higher contributions from the upstream plantation division, with higher CPO price assumptions of RM2,600 per ton from RM2,450 to RM2,500 per ton previously, but partially offset by lower FFB production forecasts,” she said.

Meanwhile, she lowered her FY22 core EPS forecast for Genting Plantations by 6.6% given a lower CPO price assumption of RM2,500 per ton from RM2,550 per ton.

She maintained her “buy” rating and TP of RM10.82 for Genting Plantations given its improving earnings prospects with rising FFB and CPO production as well as a higher contribution from its downstream manufacturing division going forward.

Meanwhile, Hong Leong Investment Bank (HLIB) Research analyst Chye Wen Fei said Genting Plantations’ 9MFY20 core net profit of RM154.4 million beat his expectations, accounting for 79.2% of his full-year estimate, due mainly to higher-than-expected realised palm product prices.

“We raise our FY20 core net profit forecast by 14.2% to RM222.8 million, mainly to account for higher realised palm product prices year-to-date (YTD),” he said.

“We maintain our FY21 to FY22 core net profit forecasts for now, pending a review of our average CPO price assumptions post the results season. Based on our estimates, every RM 100 per ton change in our average CPO price assumptions would result in our FY21 to FY22 core net profit [forecasts] changing by about 15%,” he said.

He maintained his “hold” call for the stock with an unchanged TP of RM9.60.

Genting Plantations announced yesterday its net profit for 3QFY20 surged by more than threefold to RM61.38 million, from RM17.96 million a year ago, driven by higher revenue and palm oil prices.

Its revenue rose 35.8% to RM645.56 million, from RM475.37 million, underpinned by stronger palm product prices and higher demand for refined palm products.

For 9MFY20, the group’s net profit more than doubled to RM175.31 million from RM80.39 million a year earlier. Revenue rose 8.39% to RM1.76 billion, from RM1.62 billion for 9MFY19, buoyed by better palm product prices which more than compensated for the impact of weaker crops.

Source: TheEdgeMarkets