We are maintaining our Buy call on Genting Plantations
(Genting Plant) with fair value raised mildly to RM10.13 based on sum-of-parts
valuation. Though upside appears somewhat limited in the near term, we believe stock price will
be well supported by the prospects of long term production growth coming from
its estates in Indonesia, which started to contribute in 2011. In another quarter’s time, when we roll our
valuation horizon to 12 months to June 2013, our fair value will be raised
further to RM10.46.
Results within
expectations. Genting Plant’s core
earnings came in at RM439.7m, which was very close to our forecast of RM436.9m
and consensus forecast of RM445.0m. The surprise in the results was the special
dividend announced amounting to 6.25 sen on top of final dividend of 5.75 sen.
New planting.
Achieved 1,667 ha of new planting in 4Q, bringing its total new planting to
4,509 ha for CY11. With that Genting Plant now has a total nucleus planted area
of 33,922 ha in Indonesia. On top of that, a total of 334 ha of plasma area
has been planted. New planting target
for CY12 is 7k – 8k ha.
Production. FFB
production amounted to 1.372m tonnes with very minimal 24k tonnes from
Indonesia. The 14.6% growth for CY11 has largely been driven by yield recovery and
new areas coming into production in Malaysia. Management continues to guide for
100k tonnes of FFB growth, largely from its Indonesian plantations.
Indonesia could turn
profitable in 2H. Indonesian operation made a loss of RM15.9m, wider than
RM11.5m loss in FY10. Based on current CPO price, Genting Plant’s Indonesia
operation will continue to be loss-making due to the still low yields of young palms.
Forecast change.
We tweak up our FY12 forecast slightly from RM395.7m to RM399.3m, factoring in
higher FFB production of 1.462m tonnes. We are also introducing our FY13
forecast of RM431.3m, based on average CPO price of RM3,100. Our fair value is
raised slightly to RM10.13 compared to RM10.05 previously. Our revised FV gives
an upside of 9.5%. Maintain Buy.
Source: OSK188
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