An outstanding 3Q performance
4Q22 results likely weaker QoQ
3Q22 core PATMI beat expectations on strong output, forward sales with higher CPO ASP locked-in previously, export levy exemption since mid-July, and lower-than-expected unit cost of production. 3Q’s stellar performance is unlikely to be repeated in 4Q although some forward sales remain. BUY with a new TP of SGD1.79 on 11x FY23 PER, its -1SD of 5Y mean (previously SGD1.62 on 10x FY23E PER at -1.5SD of its 5Y mean) on reduced regulatory risk. BUY for its attractive valuation and dividend yields.
3Q22 results exceeded our/ consensus expectations
3Q22 core PATMI of USD116m (+120% YoY, +114% QoQ) brings 9M22 core PATMI to USD254m (+206% YoY) which met 109%/100% of our/consensus full-year estimates. 3Q22 revenue rose 15% YoY to USD362m (+56% QoQ) despite lower CPO ASP in the spot market. In 3Q, FR benefited from (1) forward sales locked-in in prior quarter(s) but it is unclear what overall ASP was achieved in 3Q22 due to its limited disclosure; (2) strong 3Q FFB nucleus output (+12% YoY, +20% QoQ); (3) the export levy exemption since mid-July have also boosted margins (though one-off savings) especially for earlier locked in sales; (4) net inventory drawdown of 14,000t to lift sales; (5) missed fertiliser application (ie lower expenses); and (6) to a lesser extent lower-than-usual effective tax rates (without specifics).
Nucleus FFB output have peaked in 3Q
3Q FFB nucleus output (+12% YoY, +20% QoQ) picked up momentum on seasonal output recovery. This brings 9M22 FFB nucleus output to 2.28mt (+3% YoY) which met 75% of our full-year forecast (on track). FR maintains its 0-5% YoY FFB growth forecast for FY22E (MIBG: +3% YoY).
FY22E EPS raised by 30%
FR guides that this year’s fertilising programme will not be completed in time due to the non-conducive wet weather. While FR did not provide an update on fertiliser applied this quarter (1H22: ~35% of full-year plan), it did guide for lower unit cash cost to USD250-270/t on missed fertiliser application (previously USD270-290/t). We raised our FY22E EPS by 30% largely on lower fertiliser cost, and savings on export levy exemptions. Our FY23E-24E EPS forecasts are broadly unchanged.