Genting Plantations impacted by lower palm oil output, weak property sentiment

KUALA LUMPUR : Genting Plantations Bhd (GenP) reported first quarter (1QFY16) earnings that were below estimates due to negative output growth from its upstream palm oil segment as well as flattish earnings from its property division, said Maybank IB Research.

 

In a note today, the research house said GenP's core earnings were impacted by negative fresh fruit bunches (FFB) output growth as well as low crude palm oil (CPO) average selling prices.

 

GenP reported a net profit of RM26.99mil for the quarter ended March 31, down from RM52.66mil a year ago.

 

Revenue for 1QFY16 amounted to RM260.88mil compared to RM324.39mil the year before.

 

“Earnings will get better but largely in the second half (2H16) as FFB output is expected to remain weak in 2QFY16. FFB output in 1QFY16 declined by 37% on a quarter-on-quarter basis due to the lagged effect of 2015's drought,” it said.

 

Maybank IB is maintaining its 'hold' recommendation on GenP's stock with a price target of RM10.

 

Stripping aside a forex loss of RM9mil, GenP's core profits met just 10% of Maybank IB's full year estimates. Aside from lower FFB output, CPO selling prices were marginally higher at RM2,273 per tonne.

 

Meanwhile, GenP's property segment reported poor pretax profits of RM11mil in the absence of land disposal gains during the quarter, it said.

 

Additionally, property sales in 1QFY16 were flattish at RM27mil, but unbilled sales fell to RM20mil, which signals lower earnings visibility in the coming quarters.

 

“We expect sequentially stronger quarterly earnings especially in 2HFY16 when FFB output picks up sharply. Following the weak 1QFY16 output, GenP is now guiding for just a small output growth in 2016. We are keeping our earnings forecasts unchanged for now pending further clarification,” it noted.