PETALING JAYA: MIDF Research maintains a positive outlook for Genting Plantations despite having moderated its target price (TP) for the counter by as much as 21% today.
In a report issued this morning, the research house announced that it would reduce its TP for Genting Plantations down from RM10.10 to RM8. This counter was trading at RM6.35 as of 11.51am today.
It attributed its still positive outlet and “buy” call on the counter on expectations of visible revenue and earnings growth.
It noted that the company now has a planted area standing at 159,318ha, matured plantations at 134,313ha and immature areas at 25,005ha.
While maintaining an average maturity age of 11.9 years, MIDF foresees that this will provide visible revenue and earnings growth.
Looking at its performance in the first quarter of 2022 (Q1 2022), Genting Plantations revenue was slightly lower on account of lower sales volume recognised from downstream manufacturing segment.
However, MIDF said, the company managed to achieve higher average selling price for crude palm oil (CPO) and palm kernel at RM4,797 per metric tonne (up 64% y-o-y) and RM4,114 (up 83% y-o-y) respectively during the quarter.
“We forecast Genting Plantations to post sustained double-digit growth in profit before tax of 15% FY2022 as we posit cost to remain under control with 40% fertiliser and 30% labour structure as management guided, in anticipation of higher average selling price for CPO will compensate for rising input cost.,” MIDF said.
“We will revisit our assumptions and adjust our earnings forecast for FY2022 and FY2023,” it added.
MIDF expects the elevated CPO price will amplify its top- line to grow 24% y-o-y in FY2022 to RM3.9 billion but moderate 6% y-o-y to RM3.7 billion in FY 2023.
On the other hand, it said, the bottom-line will increase 18% to RM547 million in FY2022 but moderate 14% to RM470.9 million in FY2023. - FMT
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