12.10.2020 (www.theedgemarkets.com) - KUALA LUMPUR (Oct 12): Hong Leong IB Research (HLIB) has valued Sarawak Plantation Bhd (SPB) at RM2.89 and said it anticipates SPB’s earnings expansion to sustain into the next 3 years, underpinned by higher crude oil palm (CPO) prices and fresh fruit bunch (FFB) output (arising from increased harvestable area and more planted area moving to higher yield bracket).
In a trading idea note today, HLIB said based on its sensitivity analysis, every RM100/mt increase in CPO price will result in core net profit forecasts in SPB changing by RM6-7 million per annum.
“We project SPB’s core net profit to grow 39.7%, 26.8% and 11.6% to RM35.5-50.2 million in FY20-22, underpinned by (i) higher CPO prices (as we project average CPO price realised to rise from RM2,087/mt in FY19 to RM2,350/mt in FY20 and RM2,400/mt for FY21-22, in line with our sector-wide projection), and (ii) higher FFB output (arising from increased harvestable area and more planted area moving to higher yield bracket).
“We believe SPB is undervalued relative to its peers, given its improving operating efficiencies and healthy balance sheet.
“We value SPB at RM2.89 based on 18x projected FY21 EPS of 16.1 sen (implying an upside of 50.5%),” it said.