Expect higher output & forward sales ASP in 2H22
1Q22 core PATMI came in within our/ consensus expectations. Core results
would have been higher if not for MYR68m FV loss on commodities
contracts recorded in 1Q22. Seasonally higher output and higher forward
sales ASPs locked-in could help weather cost pressures (ie higher fertiliser
costs and wages) in 2H. SDPL remains a HOLD with unchanged RNAV-TP of
MYR4.97 on 0.45x RNAV peg. We prefer KLK MK (BUY, CP: 26.90, TP: 30.70).
1Q: Better upstream and downstream performances
SDPL posted a 1Q22 headline PATMI of MYR718m (+28% YoY, +53% QoQ).
Adjusted for land disposal gain (+47m), and unrealised FX loss (-71m), SDPL
posted a 1Q22 core PATMI of MYR725m (+57% YoY, +10% QoQ) which met
26% /28% of ours/consensus full-year estimates. Upstream EBIT of
MYR839m (+55% YoY, -12% QoQ) were boosted by higher CPO ASP (+40% YoY,
+7% QoQ) which more than compensate the lower FFB output (-13% YoY, –
10% QoQ). Fertiliser application was behind schedule in 1Q22. Meanwhile,
downstream EBIT of MYR132m (+23% YoY, -54% QoQ) rose on the back of
higher revenue (+27% YoY, -15% QoQ) despite marginally lower margins of
3.3% (-0.1-ppts YoY, -2.8-ppts QoQ).
Accelerated its forward sales for May-Dec 2022
SDPL has cut its 2022 FFB growth guidance to between -5% and 0% YoY
(previously single-digit growth; MIBG Research: +1.9% YoY), mainly due to
labour shortages in Malaysia. As for remaining forward sales in 2022, SDPL
guides that it has sold forward 50% of its Peninsular Malaysia output (ASP
of ~MYR4,700/t) and 40% of PNG output (ASP of ~MYR6,300/t) for May to
Dec 2022. By our estimate, they represent 30% of group output at an ASP
of ~MYR5,460/t.
Rising cost pressures covered by higher ASPs & output
The recent minimum wage hike in Malaysia is expected to increase SDPL’s
yearly cost by up to MYR90m p.a. Coupled with higher fertilizer cost locked
in recently (till 1H23’s requirements), SDPL expects its FY22E cost to
customer (per tonne) to be lower than its 1Q22’s group blended cost
achieved of MYR2,300/t (FY21: MYR1,860/t; MIBG’s FY22E assumption:
MYR2,272/t). We make no changes to our earnings forecast.