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