We are keeping our BUY recommendation on Genting Plantations
Bhd (GenP) with a higher fair value of RM10.65/share (vs. RM9.25/share
previously) based on an FY12F PE of 18x. Our previous PE assumption was
15x.
GenP’s historical PE band ranged from a low of 5x to a high
of 28x in the past seven years. The group’s average PE was 16x.
GenP’s 4QFY11 results were within consensus estimates and
our forecast. We have tweaked GenP’s FY12F earnings forecast downwards by 3%
due to housekeeping reasons.
GenP has declared a special gross DPS of 6.25 sen less 25%
tax and a final gross DPS of 5.75 sen less 25% tax for FY11. These bring total
gross DPS to 16.25 sen for FY11 (FY10: 12.5 sen), which translates into a yield
of 1.8%.
GenP’s strong net profit growth of 36.6% in FY11 was underpinned
by a 15% increase in FFB production and 18% expansion in the average CPO price.
Average CPO price realised was RM3,240/tonne in FY11 compared with RM2,738/tonne
recorded in FY10.
From the conference call yesterday, we understand that GenP
is currently selling its CPO production at spot prices. The group has not faced
any problems selling its CPO production to refineries in Malaysia.
GenP’s operating cost was RM1,064/tonne in FY11, marginally
higher than the RM1,053/tonne recorded in FY10. Operating cost could increase
in FY12F due to higher fertiliser costs. We understand that cost of fertiliser sourced
for 1HFY12 have risen by 21% compared to FY11.GenP’s FFB production is expected
to expand by 8% to 9% in FY12F. The plantation division in Indonesia is
envisaged to account for 6 percentage points of the 8% to 9% FFB output growth
while Malaysia is anticipated to account for the balance 2 to 3 percentage
points.
GenP’s FFB production in Indonesia is expected to rise from
about 24,000 tonnes in FY11 to 100,000 tonnes in FY12F.
So far, GenP has not experienced any tree stress. The group
expects the FFB yield of its oil palm trees in Peninsular Malaysia to remain
flat in FY12F while that of the trees in Sabah might improve by 5%.
GenP declined to reveal the profitability of Johor Premium Outlet
(JPO). However, we understand that the numbers were within management’s
expectation. JPO was officially opened on 2 December 2011.
Source: AmeSecurities
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