PETALING JAYA: United Malacca Bhd has locked in forward sales for 50% of its monthly production up to June this year at a price of about RM3,000 per tonne.
Kenanga Research, in a note, said it had met up with the company’s management and felt “more optimistic on its long-term prospects.’’
It said the company expected financial year (FY) ending April 30,2021 to 2022 fresh fruit bunch (FFB) growth of 12%-15%/10%-12% (versus the research house’s estimates of +10%/+4%).
This growth will be driven by abundant rainfall and better yields from its Indonesia estates as its young age profile improves.
It said the upside to its FFB growth estimate is the key positive takeaway from its meeting with the management.
The FY21 crude palm oil (CPO) price is about RM2,800-RM3,100 per tonne, with FY21 production cost at about RM1,800.
“Forward sales (50% monthly production up to June 2021) could cap realised fourth quarter FY21 CPO price at RM3,000-RM3,100, ’’ it added.
It has raised its earnings forecast of FY21-22 by 21% to 31% on higher FFB and realised CPO prices.
It has also raised the target price higher to RM5.30 a share from RM5.25. This is based on 0.8 times current year 2021 price book value (mean), but it still retains a “market perform’’ call.
For the eight months of FY21, the FFB output for its Malaysia estates increased 11% year-on-year, while the research house expected the downtrend in production to reverse in the coming months.
The management expected FY21 CPO production cost of about RM1,800: an improvement compared with the estimated FY20 CPO production cost of about RM2,100-RM2,200.