Sharply better 2H21 results
Limited upside; HOLD for 5.1cts SGD final DPS
FY21 core PATMI beat ours but was within street estimates. Better 2H21 results were lifted by higher CPO ASP and improved downstream margins. We expect FR to deliver +37% YoY growth in FY22E core PATMI mainly on higher CPO ASP. FR has significantly lower forward sales in FY22E vs FY21. Following our PATMI revisions, we raise our TP to SGD1.88 after rolling forward valuation to FY23E on unchanged 13x PER at -1SD of 5Y mean (previously SGD1.68 on 13x FY22 PER). Given limited upside, FR remains a HOLD. We prefer Bumitama Agri (BAL SP, Buy, TP: SGD0.93).
2H21: Results picked up sharply HoH
2H21 core PATMI of USD119m (+117% YoY, +393% HoH) brings FY21 core PATMI to USD149m (+54% YoY) which met 107%/104% of our/street full year estimates. 2H21 revenue rose 62% YoY to USD619m mainly driven by higher CPO/ PK ASPs of USD688/t (+29% YoY) / USD565/t (+68% YoY) and a net drawdown of inventory of 50,000 tonnes (2H20: build-up of ~25,000 tonnes), which more than offset lower FFB nucleus output (-6% YoY). The 2H21 plantation EBITDA grew 28% YoY to USD168m. As for downstream, its EBITDA grew 103% YoY to USD44m on higher margins of USD69/t (+94% YoY) which benefited from inventory gains and Indonesia’s differential export tax rates between processed palm oil and CPO.
FY22E: 0-5% FFB growth guidance
FY21’s unit cost of production was USD250/t (+13% YoY), due to higher fertilizer cost even though it has only completed 80% of its plan. With fertilizer and higher wage pressures in FY22E, FR is guiding for its unit cost to go up to USD270-290/t (+8%-16% YoY; MIBG Research: +10% YoY). As for FFB output, FR is guiding for 0-5% YoY growth for FY22E (FY21: +1% YoY). Without providing any details, FR guides that it has made some forward sales in FY22E but significantly lower in volume than FY21.
Raising FY22E/23E core PATMI by 35%/6%
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 FR by 35%/6% respectively. We also introduce our FY24E EPS forecast. FR declared a final DPS of 5.1cts SGD (ex-date: 6 May), bringing total DPS to 6.35cts (ie 50% DPR).