Historic MYR0.5b PATMI on record palm oil prices
An excellent proxy to CPO price rally
FY21 core PATMI beat our/street estimates by 37%/35% due to record palm oil products ASP. SOP is now in net cash position, allowing it to raise DPS beyond the yearly 5-6sen. A final DPS for FY21 will be proposed before its AGM (in addition to 4sen interim DPS paid). SOP is poised to benefit from high spot prices in 2022 as it has minimal forward sales. Following our EPS upgrade, we raise TP to MYR5.88 after rolling forward valuation to FY23E (from FY22) on unchanged 13x PER, its 5Y mean.
4Q results: Another beat
Adjusted for FV loss on biological assets (MYR7m), 4Q21 core PATMI of MYR216m (+10x YoY, +80% QoQ) brings FY21 core PATMI to MYR504m (+156% YoY). High 4Q palm oil products ASP of MYR5,468/t (+69% YoY, +22% QoQ) more than offset lower FFB output (-3% YoY, -2% QoQ). As for downstream, we understand it was fairly profitable in 4Q21, boosted by FV gain on derivatives of MYR41m (ie. reversing past FV losses). For FY21, we estimate its all-in operating cost of customer was at a higher MYR1,885/t (+22% YoY) due the low yields and higher State and windfall taxes paid.
Anticipating 2% YoY FFB output growth in FY22E
Due to labour shortage, FY21 FFB output fell 8% YoY to 1.25mt. Without the necessary foreign workers returning, it is hard to envisage a significant improvement in FFB output for FY22E. Furthermore, we
understand that FY21 fertilising activities were 25% behind schedule due to fertiliser supply disruption, wet weather and lack of labour. Therefore, we forecast a modest 2% YoY growth in FFB output in FY22E.
Raising CPO ASP and PATMI forecasts
Following our industry-wide CPO ASP revisions to MYR4,100/t (from MYR3,200/t) for 2022E and MYR3,200/t (from MYR3,000/t) for 2023E, we raise our FY22E/23E core PATMI forecasts for SOP by 51%/0% respectively. In FY21, SOP revised down the estimated useful economic life of oil palms trees to 22 years (from 25 years), and hence accelerated its amortisation expenses. We reflected this new accounting policy in our revised PATMI forecasts. We also introduce our FY24 EPS forecast.