02/04/2012 (Borneo Post) - United Malacca Bhd (United Malacca) recorded nine month 2012 core net profit of RM73.6 million was within analyst and consensus expectations, coming in at 25 per cent higher year-on-year (y-o-y).

“The solid result came as crude palm oil (CPO) prices strengthening to six per cent y-o-y to RM3,119 per metric tonne while fresh fruit bunch (FFB) output surged 16 per cent y-o-y to 232,000 metric tonne,” Kenanga Investment Bank Bhd (Kenanga Research) said in its research report.

One a quarter-on-quarter (q-o-q) basis, the company’s third quarter 2012 core net profit declined nine per cent to RM21.3 million as FFB production declined 11 per cent to 71,875 metric tonnes albeit seeing industry CPO prices increasing three per cent q-o-q to RM3,103 per metric tonne.

The research house added that oil extraction rate (OER) in the third quarter had declined to 20.1 per cent from the second quarter’s 21.3 per cent due to the rainy season.

“We are not too concerned on the OER decline as the weather should improve in the fourth quarter of 2012 in line with the end of La Nina,” opined Kenanga Research.

The report went on to note that in line with historical practice, no dividend was declared in the third quarter though it was expected United Malacca to declare its net final dividend of 17.4 sen in June 2012 during its fourth quarter results announcement.

For its financial year 2012 estimates, Kenanga Research was expecting total net dividend of 27.4 sen, implying generous dividend yield of 3.7 per cent.

“We have trimmed our financial year 2012 expected core net profit by three per cent to RM92.9 million but will be maintaining our financial year 2013 expected core net profit of RM116.5 million,” said the research house.

It went on to reduce its financial year 2012 expected FFB volume by two per cent as the third quarter 2012 FFB volume came in lower than expected. Should the trend continued for the industry, Kenanga Research believed that there might be further upsides to CPO prices.

It noted that for every RM100 increase in CPO prices, it expected United Malacca earnings to increase by four per cent.

Kenanga Research pegged a target price of RM8 per share for United Malacca based on 14 times forward price earnings ratio to financial year 2013 expected earnings per share of 57.3 sen