<Result Analysis> Finish strong in 2021
- 4Q21 earnings reached US$66m (+296.4% y-o-y, +25.1% q-o-q) in line with our estimate
- Better palm oil selling prices in 4Q21 offset lower production volume q-o-q
- We have a BUY call with TP of S$1.83; Positive earnings momentum likely to sustain at least in 1H22
What’s new
- 4Q21 of US$66m (+296.4% y-o-y, +25.1% q-o-q) was in-line with our estimate. FY21 earnings reached US$149.2m (+53.8% y-o-y) , largely in line with our estimate of US$134.4m (34% y-o-y). The 4Q21 earnings improvement was driven by better CPO selling prices , as FR did not hedge any of its sales volume in the period.
- Proposed final dividend of S$0.051/share. FR distribute S$0.0635/share of total dividend in 2021 , in line with its new dividend policy that FR to distribute up to 50% of underlying net profit annually starting 2021.
- Top line reached US$305m (+41.2% y-o-y, -2.9% q-o-q) in 4Q21. FR managed to improve its top line in 4Q21amid lower palm oil and kernel production, thanks to the selling prices. CPO and PK production volume reached 212.3k MT (-7% y-o-y, -13.8% q-o-q) and 48.3k MT (-11.1% y-o-y, -7.2% q-o-q) respectively.
- 4Q21 production performance weaker q-o-q on heavy rainfall in Kalimantan. The heavy rainfall in Kalimantan caused logistics congestions and ineffective fruits pollination. FR’s fruit yield reached 4.4 MT/ha vs. 3Q21’s 4.6 MT/ha and 4.5MT/ha in 4Q20 respectively. FR’s own estates harvested Fruits reached 722k MT (-5.7% y-o-y, -8.3% q-o-q), but FR managed to secure more fruits from external farmers in 4Q21 at 112.2kMT (+5.2% y-o-y, +1% q-o-q).
Outlook
- Strong earnings momentum likely to sustain at least in 1H22. Considering the decent palm oil price outlook, we think FR could sustain the strong earnings performance at least in 1H22. The key things to watch is how well FR can manage its logistics and operation amid Indonesia CPO domestic market obligation (DMO) schemes to fight against cooking oil shortages that commenced in February 2022.
- We have a BUY rating with TP of S$1.83. Stock price has been performing well in 2022 and considering the current higher than expected CPO price benchmark trend, we see the positive share price momentum will continue ahead. FR will host analyst briefing later today and we will update for anything significant.
Quarterly earnings performance summary
| 4Q21 | 3Q21 | 2Q21 | 1Q21 | 4Q20 | y-o-y | q-o-q | FY21 | FY20 | y-o-y | |
| US$m | US$m | US$m | US$m | US$m | Change | Change | US$m | US$m | Change | |
| Revenue | 305 | 314 | 216 | 196.9 | 216 | 41.2% | -2.9% | 1,032 | 660 | 56.3% |
| EBITDA | 109 | 109 | 54 | 41.5 | 81 | 34.2% | -0.2% | 313 | 259 | 20.7% |
| NPATMI | 66 | 53 | 21 | 8.8 | 17 | 296.4% | 25.1% | 149 | 97 | 53.7% |
| EBITDAM (%) | 35.6% | 34.6% | 25.0% | 21.1% | 37.4% | 30.3% | 39.2% | |||
| NPATMIM (%) | 21.7% | 16.8% | 9.9% | 4.5% | 7.7% | 14.5% | 14.7% | |||
| Sales Statistics (MT) | ||||||||||
| FFB harvested (MT) | 834,247 | 909,506 | 826,483 | 797,432 | 885,135 | -5.7% | -8.3% | 3,367,668 | 3,273,584 | 2.9% |
| Own | 722,018 | 798,048 | 720,331 | 700,037 | 778,449 | -7.2% | -9.5% | 2,940,434 | 2,903,800 | 1.3% |
| Smallholders | 112,229 | 111,358 | 106,252 | 97,395 | 106,686 | 5.2% | 0.8% | 427,234 | 369,784 | 15.5% |
| CPO production (MT) | 212,373 | 228,460 | 215,844 | 212,564 | 246,260 | -13.8% | -7.0% | 869,241 | 855,668 | 1.6% |
| PK production (MT) | 49,286 | 53,096 | 48,031 | 46,971 | 55,438 | -11.1% | -7.2% | 197,384 | 192,840 | 2.4% |
| FFB Yield (MT/ha) | 4.4 | 4.6 | 4.2 | 4.0 | 4.5 | 17.2 | 16.4 | |||
| CPO Yield (MT/ha) | 1 | 1.10 | 1.00 | 0.9 | 1.1 | 3.9 | 3.8 | |||
| CPO extraction rate (%) | 22.1 | 22.5 | 23.10 | 23.1 | 22.9 | 22.7 | 23.2 | |||
| PK extraction rate (%) | 5.4 | 5.2 | 5.10 | 5.1 | 5.2 | 5.2 | 5.2 |
Source : Company, DBS Bank
Source : Company