After excluding the change in the fair value of biological assets, the core PATAMI for Sarawak Plantation's 3QFY24 decreased to RM21.8m, a decline of -15.6%yoy. MIDF IB in its report said this brought the 9MFY24 core PATAMI to RM46.5m (-1.1%yoy), which is relatively unchanged, and represents below 65%/67% of its/consensus full-year estimates. Overall, earnings were weaker due to lower sales volume and mill utilisation rates. As a result, operating profit softened to RM31.0m (-9.1%yoy), with a margin remaining flat at 20.8% (+1.0 pts).

Estate earnings increased to RM28.0m, reflecting an +8.6%yoy growth, in line with higher revenue and FFB production during the peak season. However, profitability for the mills declined by – 49.7%yoy to RM6.2m. Despite the elevated average selling prices of CPO and PK, which rose to RM3,945/Mt (+4.9%yoy) and RM2,265/Mt (+17.7%yoy) respectively, profitability was impacted. This decline MIDF said was primarily due to a lower OER of 19.3% and externally purchased FFB supplied, as the estates activities and FFB evacuation process was disrupted by adverse weather conditions.

On the operational front, the harvestable hectarage and FFB production grew by +8%yoy and +4.0%yoy respectively, supporting the FFB yield to be around 4.6Mt/ha. Additionally, external purchases remained a significant contributor, dragging the FFB processed to fall by +21.0% mainly due the ripeness of the fruitlet was somewhat affected due resting year.

The house said it is tweaking the earnings forecasts by – 13.9%yoy/+8.5%yoy/+13.1%yoy for FY24E-26F, after considering new average CPO TP price revision of RM4,200/Mt/RM4,300/Mt/RM4,000/Mt respectively and lower FFB Processed, OER as well CPO production due to biological tree rest concerns amid the elevated cost of external FFB purchase.

All in all, MIDF is maintaining its NEUTRAL call with a revised TP of RM2.15 as the rollover valuation to PER of 9.0x – nearly historical 5y average mean by pegging FY25F EPS of 23.9sen