KUALA LUMPUR: United Malacca Bhd’s first quarter ended July 31 (1Q24) earnings missed expectations, which has led to analysts cutting estimates.
Kenanga Research said United Malacca’s 1Q24 core net profit came in at only 11% and 10% of our full-year forecast and the full-year consensus estimate, respectively.
The research house said the variance against its forecast came largely from higher production cost and softer crude palm oil prices realised.
It said the same reasons contributed to a 74% year-on-year (YoY) plunge in 1Q24 core net profit.
“We cut our FY24-25F net profit by 15% and 18%, respectively, but maintain our asset-based target price of RM5.00 and ‘market perform’ call,” Kenanga said.
The research house has raised the average CPO price back to RM3,800 per tonne from RM3,700 for FY24-25 on the back of a higher risk premium for palm oil in light of the pending El Nino, which is now almost certain, just a matter of severity.
Specifically, should the current expectation of a “strong” El Nino turn to “very strong,” even higher CPO prices cannot be dismissed.
Meanwhile, TA Securities has revised downward its FY24 and FY25 earnings projections by 40.7% and 6.8% respectively, after imputing lower margins and higher interest costs.
“Management expects the FFB production to be higher in FY24, supported by better oil palm age profile and crop recovery in Indonesia operations.
“Going forward, management would remain focused on improving labour productivity, mechanisation initiatives, and cost efficiency, as well as increasing oil yield,” it said.
TA has maintained its “sell” call on the counter with a lower target price of RM4.01 from RM4.78 previously.