Cautious outlook for United Malacca

TheStar Thu, Dec 17, 2020 10:20am - 4 months ago


TA Securities Research said, in a report, United Malacca’s management expected FY21’s FFB (fresh fruit bunch) production to be higher due to better yields, age profile and an increase in mature area in oil palm estates in Kalimantan, Indonesia.

PETALING JAYA: United Malacca Bhd’s forecast earnings for the current and next financial years have been revised down by TA Securities Research, which cited lower margins and higher finance costs.

The research unit said it had revised the plantation group’s FY21 (financial year ending April 30,2021) and FY22 earnings forecast by 21% and 15%, respectively, while also forecasting FY23 earnings of RM48.9mil (9% higher year-on-year).

TA Securities Research said, in a report, United Malacca’s management expected FY21’s FFB (fresh fruit bunch) production to be higher due to better yields, age profile and an increase in mature area in oil palm estates in Kalimantan, Indonesia.

According to United Malacca’s management, the group is not facing severe labour shortage and its priority remains on improving labour productivity and cost efficiency as well as increasing FFB yield.

However, the group is still cautious in view of the uncertainty of the global demand for CPO (crude palm oil) due to the Covid-19 pandemic.

For its Q2FY21 (second quarter ended Oct 31,2020), after stripping out all exceptional items, the group reported a core net profit of RM7.2mil, compared with a loss of RM13.7mil a year ago.

The improved financial performance was mainly due to higher palm oil prices and FFB production.

The results still came below TA Securities Research’s full-year estimates, mainly due to higher than-expected finance cost and lower margins,

“However, it should be noted the results were above the consensus’ full-year estimates of market analysts, ” it said.

For the first half of FY21, the group reported a core net profit of RM7.2mil, compared to a loss of RM32.2mil recorded a year ago.

The first half of FY21 also saw FFB production increased by 12.4% year-on-year to just over 200,000 tonnes, mainly due to higher yield of FFB production in both Malaysia and Indonesia.In Malaysia, the average CPO selling price increased by 25.9% year-on-year to RM2,530 per tonne while the palm kernel selling price also increased substantially to RM1,446 per tonne (27.2% higher year-on-year).

The group’s operations in Malaysia recorded a FY21 first half earnings before interest, taxes, depreciation, and amortisation (EBITDA) of RM38.2mil, compared with RM7.6mil a year ago.

Meanwhile, Indonesia operations registered an EBITDA of RM3.8mil compared with a loss of RM400,000 a year ago.

The group also declared a first interim single-tier dividend of three sen for the quarter under review.

TA Securities Research maintained its “sell “call on United Malacca with a lower target price of RM4.51, based on 2021 price-to-earnings ratio of 24 times.






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