3Q Profit Rocked by Low FFB Harvest

Stock Name: UMCCA
Company Name: UNITED MALACCA BHD

Research House: TA

Price Call: BUY

Target Price: 7.38

Upside Still Exists

Stock Name: UMCCA
Company Name: UNITED MALACCA BHD

Research House: TA

Price Call: BUY

Target Price: 7.57

FFB Output Accelerates

Stock Name: UMCCA
Company Name: UNITED MALACCA BHD

Research House: TA

Price Call: BUY

Target Price: 7.83

Steady Growth

Stock Name: UMCCA
Company Name: UNITED MALACCA BHD

Research House: TA

Price Call: BUY

Target Price: 7.83

UMCCA - Dividend Surprise

Stock Name: UMCCA
Company Name: UNITED MALACCA BHD

Research House: TA

Price Call: BUY

Target Price: 9.03

UMCCA - Hitting the Trough. Upgrade to Buy

Stock Name: UMCCA
Company Name: UNITED MALACCA BHD

Research House: TA

Price Call: BUY

Target Price: 8.81

UMCCA - FFB Growth Lags Target

Stock Name: UMCCA
Company Name: UNITED MALACCA BHD

Research House: TA

Price Call: HOLD

Target Price: 7.94

A Mild Rebound

Stock Name: UMCCA
Company Name: UNITED MALACCA BHD

Research House: TA

Price Call: HOLD

Target Price: 7.94

Still A Catch

Stock Name: UMCCA
Company Name: UNITED MALACCA BHD

Research House: TA

Price Call: HOLD

Target Price: 8.42

Strong Harvest Just Ain’t Enough

Stock Name: UMCCA
Company Name: UNITED MALACCA BHD

Research House: TA

Price Call: SELL

Target Price: 6.83

Streamlining Assets

Stock Name: UMCCA
Company Name: UNITED MALACCA BHD

Research House: TA

Price Call: SELL

Target Price: 6.74

No Visible Catalyst Yet

Stock Name: UMCCA
Company Name: UNITED MALACCA BHD

Research House: TA

Price Call: SELL

Target Price: 6.00

Lower Earnings on Depressed CPO Price

Stock Name: UMCCA
Company Name: UNITED MALACCA BHD

Research House: TA

Price Call: SELL

Target Price: 6.00

Reaping Fruits of Investments

Stock Name: UMCCA
Company Name: UNITED MALACCA BHD

Research House: TA

Price Call: SELL

Target Price: 6.00

Charting Towards Higher FFB Harvest

Stock Name: UMCCA
Company Name: UNITED MALACCA BHD

Research House: TA

Price Call: HOLD

Target Price: 8.27

Dividends the Key Attraction

Stock Name: UMCCA
Company Name: UNITED MALACCA BHD

Research House: TA

Price Call: HOLD

Target Price: 8.27

Kenanga cuts Utd Malacca's target price

Stock Name: UMCCA
Company Name: UNITED MALACCA BHD

Research House: KENANGA

Price Call: BUY

Target Price: 7.70

Kenanga Research cut its target price for palm oil firm United Malacca Bhd to RM7.70 from RM8.00 after the firm announced weaker Q4 earnings.

Year-on-year net profits for Q4 dropped 46 percent to RM12.3 million due to higher fertilizer costs and lower fresh fruit bunches production, Kenanga said in a note.

Keeping its "outperform" call, Kenanga cut its earnings forecast for FY2013 by 5 percent to RM111 million, and FY2014 by 4 percent to RM114 million. -- Reuters

Down but Not Out

Stock Name: UMCCA
Company Name: UNITED MALACCA BHD

Research House: TA

Price Call: HOLD

Target Price: 8.27

Plantation - OVERWEIGHT - Tree stress effect may have just starte

Stock Name: SIME
Company Name: SIME DARBY BHD

Research House: KENANGA

Price Call: BUY

Target Price: 11.60

Stock Name: IJMPLNT
Company Name: IJM PLANTATIONS BHD

Research House: KENANGA

Price Call: BUY

Target Price: 4.25

Stock Name: TAANN
Company Name: TA ANN HOLDINGS BHD

Research House: KENANGA

Price Call: BUY

Target Price: 7.75

Stock Name: UMCCA
Company Name: UNITED MALACCA BHD

Research House: KENANGA

Price Call: BUY

Target Price: 8.00

Stock Name: KLK
Company Name: KUALA LUMPUR KEPONG BHD

Research House: KENANGA

Price Call: HOLD

Target Price: 23.60

Stock Name: IOICORP
Company Name: IOI CORPORATION BHD

Research House: KENANGA

Price Call: HOLD

Target Price: 5.60

Stock Name: GENP
Company Name: GENTING PLANTATIONS BERHAD

Research House: KENANGA

Price Call: HOLD

Target Price: 9.90

Malaysia's CPO inventory level for Mar-12 was reported at1.96m mt or 2% lower than the consensus estimate of 2.00m mt. It was also 6%below our estimate of 2.08m mt. The key surprise was the better-than-expectedexports growth of 11% MoM to 1.34m mt (5% above the consensus and ourexpectation of 1.28m mt). Judging from the CPO production severe YoY decline of14% to 1.21m mt in Mar-12, we believe that oil palm trees may have just enteredtheir tree stress period. Typically, CPO production will be flat or declineduring its tree stress period. Among the key CPO consumers, the highest exportgrowth was noticed in Pakistan (+125% MoM to 78k mt), Europe (+63% MoM to 174kmt) and India (+11% MoM to 120k mt). The latest USDA WASDE report was bullishto CPO prices as it reaffirmed the global soybean oil shortage for the 2011/12season. The global soybean oil inventory was cut by 0.17m mt or 6.2% from itsprevious forecast to only 2.56m mt. All the bullish fundamental  factors mentioned continue to support ourOVERWEIGHT call on the plantation sector. We maintain our CY12 average CPO priceof RM3,200 per mt but may increase it further if soybean oil production continuesto deteriorate in South America.  We  have OUTPERFORM  calls  on SIME (TP: RM11.60) and IJM Plantation (TP: RM4.25) on valuation grounds.To leverage on  their  double digit  FFB  growth, we  also  have OUTPERFORM  calls  on Ta  Ann (RM7.75) and UnitedMalacca (TP: RM8.00). Meanwhile, we maintain MARKET PERFORM calls on KLK (TP:RM23.60), IOI (TP: RM5.60) and GENP (TP: RM9.90).

Mar-12 stocks levelbelow expectation.  The  CPO inventory level of 1.96m mt was 2% lowerthan the consensus estimate of 2.00m mt. It is also 6% below our estimate of 2.08m mt. The key surprise was thebetter-than-expected exports growth of 11% MoM to 1.34m mt (5% above theconsensus and our expectation of 1.28m mt). As the exports growth of 11% MoMsurpassed the production increase of 2% MoM, the stocks-to-usage ratio declined to 11.3% in Mar-12 (from 13.5%in Feb-12). On the overall, the meaningful drop in the stocks level to below2.00 mt is positive for CPO prices.

Tree stress effecthas just started. CPO production slumped 14% YoY to 1.21m mt in Mar-12.  The decline  was  more severe  than  market expectations  of  a 7%  to  9% drop  and  our expectation of a 2% drop. As highlightedearlier  in our sector update report on27 Mar, we believe that the tree stress effect on oil palm trees has started.Hence, the CPO production upcycle, which has lasted for 12 months (from Mar-11to Feb-12) should have ended. In Apr-12, CPO production is likely to register aYoY production decline of about 4% to about 1.47m mt. However, our estimate mayappear too optimistic at the current juncture as the severity of tree stresseffect is still unclear. CPO prices are nonetheless likely to appreciatefurther as CPO production will be limited as tree stress effects usually lastfor 2 years.

Strong CPO exports inMar-12 likely to continue. Exports surged by 11% MoM or 132k mt in Mar-12to 1.34m mt. Among the key CPO consumers, the highest growth was seen in Pakistan(+125% MoM to 78k mt), Europe (+63% MoM to 174k mt) and India (+11% MoM to 120kmt). The strengthening CPO exports to Pakistan were probably caused by a normalisationprocess as the Feb-12 number was extremely low (due to transporters' strike in thecountry causing closure of the factories). The strong CPO export trend islikely to continue in  April,  judging from  the  cargo surveyor's  estimate  of an  8%  CPO export  growth  to 479k  mt in the first 10 days ofApril. The resilient CPO demand should support CPO prices in 2Q12.

USDA WASDE reportbullish for CPO prices.  In thelatest World Agriculture Supply and Demand Estimates report released on 10 Apr,USDA has reduced its 2011/12 season global soybean oil inventory by 0.17m mt or6.2% from its previous forecast to only 2.56m mt. As a result, the 2011/12season global soybean oil stock-to-usage ratio declined by 41pp to 6.08% fromlast month's estimate of 6.49%. Soybean oil production from South America has meanwhilebeen severely affected by bad weathers. Argentina soybean oil productionforecast has been reduced by 0.13m mt or 1.7% to 7.30m mt while Brazil soybeanoil production has been  cut  by 0.11m  mt  or 1.6%  to  6.81m mt.  CPO  prices will  benefit  from this  as  it is  usually used as a substitutefor soybean oil.  


Source: Kenanga

United Malacca - OUTPERFORM - 30 Mar 2012

Stock Name: UMCCA
Company Name: UNITED MALACCA BHD

Research House: KENANGA

Price Call: BUY

Target Price: 8.00

9M12 core net profit of RM73.6m was within expectations andwas 25% higher YoY, on the back of higher CPO prices and FFB output. However,3Q12 core net profit declined 9% QoQ to RM21.3m as FFB production declined 11%QoQ to 71,875mt while Oil Extraction Rate decreased to 20.12% from 2Q12's 21.27%due to wet weather. In line with historical practice, no dividend was declaredin 3Q12. However, we are expecting UMCCA to declare its net final dividend of 17.4sen in Jun-12 during its 4Q12 results announcement. We  trim our  FY12E  core net  profit  by  3% toRM92.9m after reducing our FY12E FFB volume by 2% to c.300k mt, whilst FY13Ecore net profit of RM116.5m is unchanged. Maintain OUTPERFORM with an unchangedTarget Price of RM8.00 based on 14.0x Fwd PER (+0.5SD @ 5-year average Fwd PER)to FY13E EPS of 57.3 sen. We like UMCCA for its attractive dividend yield of3.7% and high earnings sensitivity to CPO prices. For every RM100 increase inCPO prices, we expect UMCCA earnings to increase by 4%.

Within expectations.  9M12 core net profit of RM73.6m was withinexpectations, making up 77% each of consensus FY12E earnings of RM99m and oursof RM96m respectively. The solid result was 25% higher YoY as CPO pricesstrengthened 6% YoY to RM3,119 per mt (based on MPOB prices) while FFB output surged16% YoY to 232k mt.

Weaker QoQ due toseasonality.  The Company's 3Q12 corenet profit declined 9% QoQ to RM21.3m as FFB production declined 11% QoQ to71,875mt albeit seeing industry CPO prices increasing 3% QoQ to RM3,103 per mt.In addition, Oil Extraction Rate in 3Q12 has declined to 20.1% from 2Q12's21.3% due to the rainy season. We are not too concerned on the OER decline asthe weather should improve in 4Q12 in line with the end of La Nina.

Look forward to 4Q12dividend of 17.4 sen.  In line with historicalpractice, no dividend was declared in 3Q12. However, we are expecting UMCCA todeclare its net final dividend of 17.4 sen in Jun-12 during its 4Q12 resultsannouncement. For FY12E, we are expecting total net dividend of 27.4 sen,implying generous dividend yield of 3.7%.

Trim FY12E core netprofit by 3% to RM92.9m, but maintain FY13E core net profit of RM116.5m.  We have reduced our FY12E FFB volume by 2% toc.300k mt as 3Q12 FFB volume came in lower than expected. If the lower FFBvolume trend continues for the industry, we may eventually see further upsides to CPO prices. For every RM100increase in CPO prices, we expect UMCCA earnings to increase by 4%.

Source: Kenanga