PETALING JAYA: PublicInvest Research expects Chin Teck Plantations Bhd
to see better results in the final quarter of the financial year 2023 (4Q23), underpinned by improved crude palm oil prices, supported by the current El Nino weather pattern.
Despite the group’s latest weaker-than-expected 3Q23 results, the research house has kept its earnings forecasts on the plantation company.
It also maintained a “neutral” call on the stock with a target price of RM7.70.
Stripping out foreign exchange gain of RM4.4mil, Chin Teck posted core earnings of RM35.2mil, down 57% year-on-year (y-o-y) for the first nine months of its current financial year (9M23), making up 69% and 68% of PublicInvest Research and the street’s full-year expectations respectively.
In its note to clients, the research house said a second dividend per share (DPS) of eight sen, together with a special DPS of two sen, were declared for the quarter, bringing year to date DPS to 20 sen.
During the quarter under review, the group’s revenue tumbled 44% y-o-y to RM47mil, mainly led by a decline in both palm oil prices and fresh fruit bunch production.
The average crude palm oil (CPO) price retreated from RM6,091 per tonne to RM4,080 per tonne (9M23: RM4,028 per tonne versus 9M22: RM5,184 per tonne).
As of 9M23, total planted area stands at 11,802 ha with 10,108 ha of mature area, said PublicInvest Research.
Meanwhile, the group’s 3Q23 core profit sank from RM27.6mil to RM9.7mil, weighed down by a significant rise in CPO production cost due to a jump in cost of fertiliser and administrative expenses, as well as weaker palm oil selling prices.
The surge in administrative expenses from RM6.2mil to RM8.5mil was attributed to the acquisition of a subsidiary, Fauzi-Lim Plantation Sdn Bhd.
In addition, its plantation associate in Indonesia made a turnaround with a small profit contribution.
Chin Teck also highlighted the continued disruption to its joint venture-owned Indonesian plantation.
Since 2012, the unrest in the surrounding villages located in the vicinity of the plantations in Lampung Province, Indonesia, had seriously affected the routine harvesting activities.
As of now, the total accessed area is about 53.61% of the total planted area.
