PETALING JAYA: Riding on high crude palm oil (CPO) prices, United Malacca Bhd (UMB) had a strong start that beat analysts’ expectations for the first quarter (Q1) of financial year 2022 (FY22).

       A stronger Q2 is seen on better prices and output.

       After stripping out all exceptional items, UMB’s Q1 of FY22 core net profit improved significantly to RM18.4mil as compared to a net loss of RM0.1mil recorded in the same period last year.

       This was due mainly to higher average selling prices (ASPs) for its palm products, as well as stronger fresh fruit bunch (FFB) yields in its Indonesian estates.

       Moving forward, TA Research said its management expects FFB growth to be in the range of 10% to 15% in FY22.

       “The higher FFB production growth will be supported by better yields, palm tree age profile and an increase in mature area in oil palm estates in Kalimantan, Indonesia,” it said in a report.

       The research firm added that the group’s main priority remains on increasing FFB yield, which will enhance its cost efficiency.

       “According to management, the group is adopting more mechanisation to mitigate the impact of shortage of workers,” it noted.

       TA maintains a “buy” call on the stock with an unchanged target price of RM6.07, based on 2022’s price to earnings ratio 24 times.

       Meanwhile, CGS-CIMB Research said it is raising its FY22-FY24 net profit forecasts by 133% to 164% to reflect higher CPO price assumptions.

       “We expect UMB to deliver stronger quarter-on-quarter Q2 of FY2 net profits from seasonally higher FFB output and higher ASPs for its palm products,” it said.

       However, the research firm has lowered its target price to RM5.05. It also reiterates its “hold” call as it believes that UMB appears fairly valued at current levels.