Stripping out FX gain of RM0.9m, Chin Teck Plantations turned in 1QFY23 core earnings of RM24m (YoY: -8.3%), making up 38% and 36% of our and the street’s full-year expectations, respectively. The stronger-than-expected results were attributed to a sharp increase in FFB production despite a decline in CPO prices. A first DPS of 10sen (1QFY22: 13sen) was declared for the quarter. In view of the stronger-than-expected FFB production for the first quarter, we raise our FY23-25 earnings forecasts by 10%-20% to reflect the strong FFB production growth. Maintain Neutral with a higher TP of RM8.87 (previously RM7.98) based on 11x FY24 EPS.
- 1QFY23 topline rose 8.1% YoY. During the quarter, the Group’s revenue climbed 8.1% YoY to RM62.9m, mainly led by a steep increase in FFB production despite chalking a weaker CPO price. Average CPO price retreated from RM4,354/mt to RM4,036/mt while 1QFY23 FFB production jumped by 34.2% YoY to 62,623mt. Oil extraction rate for CPO weakened from 19.78% to 19.40%. As of 1QFY23, total planted area stands at 10,960ha with 9,264ha in mature areas.
- 1QFY23 bottomline fell 8.3% YoY. The Group’s 1QFY23 core profit dropped from RM26.6m to RM24.4m, as plantation earnings declined 17.5% YoY, weighed down by a significant rise in CPO production cost and weaker selling prices. In addition, earnings contributions from its associate and joint-venture fell from RM3.9m to RM3.4m, due to a decline in both Indonesian plantation earnings and property development.
- Disruption to JV-owned Indonesian plantation continues. Since 2012, the unrest in the surrounding villages located in the vicinity of the plantations in Lampung Province, Indonesia, has seriously affected the routine harvesting activities. As of now, the total accessed area is about 53.6% of the total planted area. Meanwhile, harvesting of the mature area located in South Sumatera Province has also been delayed due to the unrest in the neighbouring estate. Commencement of harvesting is pending clearance by the relevant authorities.
Source: PublicInvest Research - 31 Jan 2023
