Indonesia to drive yields moving forward
? FY4/22 core net profit jumped 5.3x yoy due to higher CPO prices; core EPS
was in line while DPS underperformed.
? We expect a better FY23F on higher CPO prices and Indonesian FFB yields.
? We raise our TP to RM5.55 but reiterate our Hold call as we believe UMB
appears fairly valued at current levels.
FY4/22 boosted by stronger CPO price; DPS underperformed
United Malacca’s (UMB) 4QFY22 core net profit climbed 6.8x yoy to RM32m (vs. RM5m
in 4QFY21), due mainly to higher average CPO prices achieved. This contributed to a
5.3x yoy jump in FY4/22 core net profit to RM115m, which came in line with
ours/consensus expectations, making up 102%/98% of our/consensus full-year core net
profit forecasts. UMB’s reported net profit in 4QFY22 was 42% lower vs. core net profit,
due mainly to an impairment on intangible assets of RM12.3m and plasma receivables
discount of RM5.3m. The group declared a second interim dividend of 5 sen, coupled
with special dividend of 5 sen, bringing total dividend declared in FY22 to 15 sen (29%
payout), lower than our full-year expectation of 22 sen (FY4/21: 10 sen, 161% payout).
Malaysian operations boosted by higher ASPs and FFB yields
UMB’s Malaysian operations posted a 2.3x increase in FY4/22 EBITDA to RM186m, due
mainly to higher ASPs achieved and better FFB yields. The CPO price achieved for
FY4/22 at its Malaysian operations jumped 66% yoy to RM4,706/tonne. For 4Q22, the
75% yoy leap in CPO price to RM6,034/tonne starkly offset the 2% drop in FFB yields,
allowing it to book a 2.3x increase in EBITDA. We believe UMB’s FFB production for the
quarter continues to be affected by labour shortages. The CPO price achieved for the
quarter was 6% lower than the MPOB reference price for the same period, suggesting
that UMB largely sold its CPO on a spot basis for the quarter.
Indonesia operations hit by wetter weather and floods
UMB’s Indonesia (Kalimantan) estate operations only booked an 8% yoy rise in its
4QFY22 EBITDA as the higher CPO/PK prices (+42%/77%) were mostly offset by the
weaker FFB yields (-7% yoy) and higher operating costs, which we reckon could be from
higher manuring costs. UMB also incurred an impairment on intangible assets relating to
its Sulawesi venture of RM12.3m. We believe this could be due to a longer time taken for
the high conservation value (HCV) study to be completed and for operations to resume.
Reiterate Hold; better CPO prices baked into valuations
We raise our FY23-24F core net profit estimates to reflect our higher CPO price
forecasts. Our TP rises slightly to RM5.55, now based on a CY23F EV/EBITDA of 8.6x
(9.9x previously), in line with our Malaysia sector average CY23F EV/EBITDA, with a
25% ESG and liquidity discount. Key re-rating catalysts are any unlocking of value of the
group’s estates through estate sales. Upside/downside risks include higher/lower CPO
prices and FFB production.