KUALA LUMPUR: Chin Teck Plantations Bhd is projected to achieve commendable results for its financial year 2024 (FY24), due to the stronger-than-anticipated fresh fruit bunches (FFB) growth in the first nine months and stable crude palm oil (CPO) prices.
Public Investment Bank Bhd (PublicInvest) said the FFB production rose by 19.9 per cent year-on-year (YoY) to 177,967 metric tons in the first nine months, surpassing its projection of 5 per cent.
"In the third quarter (3Q), FFB production surged by 59.8 per cent YoY to 60,693 metric tons, while the average CPO price increased from RM4,044 per metric ton to RM4,128 per metric ton.
"Given the improved FFB production and CPO prices, we anticipate stronger earnings for the third quarter of the of the financial year 2024 (3QFY24) (March 2024–May 2024), with results expected to be released by the end of July," it said.
Additionally, the bank-backed research firm noted that, with a substantial cash reserve of over RM400 million, Chin Teck is well-positioned to explore merger and acquisition (M&A) opportunities to expand its landbank in its current plantation areas.
On the potential privatisation of the company, PublicInvest said it cannot be ruled out given the significant discount to its underlying value, as the company's price-to-earnings P/E ratio stands at only 2x after accounting for its cash holdings of RM409 million and investment securities of RM140 million.
"In our March 25, 2024 report, we highlighted the potential for privatisation due to the significant discount to the company's underlying value, with the fair value estimated at over RM900 million, or RM9.84 per share.
"At the current share price, the Goh family would need approximately RM150–200 million to privatise the group, which holds a cash reserve of RM409 million," it said.
PublicInvest has maintained a 'neutral' rating for Chin Teck with an unchanged target price of RM8.38.