Thursday 28 Mar 2024
By
main news image

This article first appeared in The Edge Financial Daily on February 13, 2018

Genting Plantations Bhd 
(Feb 12, RM10.04) 
Maintain buy with an unchanged target price (TP) of RM12.60:
Financial year 2017 (FY17) earnings are likely to meet expectations. Genting Plantations Bhd is expected to release its fourth-quarter financial year FY17 (4QFY17) results this month. We are expecting its 4QFY17 core net income (CNI) to be in the range of RM95 million to RM105 million. Including the year-to-date (YTD) nine months of FY17 (9MFY17) CNI of RM233 million we expect FY17 CNI to be in the range of RM328 million to RM338 million. Overall, we believe Genting Plantations’ FY17 CNI should meet both consensus and our expectations.

Earnings should improve quarter-on-quarter (q-o-q) but weaker year-on-year (y-o-y) in 4QFY17. The q-o-q improvement for 4QFY17 is mainly driven by seasonally stronger fresh fruit bunch (FFB) production (+10% q-o-q to 534,823 tonnes) which more than offset lower CPO price (-3% q-o-q to RM2,611 per tonne based on Malaysian Palm Oil Board [MPOB] data). 

On a y-o-y basis, 4QFY17 earnings should weaken slightly as the small increase in FFB production (+1% y-o-y to 534,823 tonnes) is not enough to offset lower CPO price impact (-11% to RM2,611 per tonne). 

To recap, the plantation division is the biggest earnings contributor for Genting Plantations with an operating profit of RM315 million (or 89% of the group’s) in 9MFY17. We are not overly concerned about the low y-o-y FFB growth in 4QFY17 as the production has recovered in January 2018 with 22% FFB growth y-o-y to 166,814 tonnes. For the property division, we expect the 4QFY17 revenue and earnings to remain soft as the projects are in the initial stages of development. 

Having said that, the outlook for FY18 is slightly better as the sales have improved in 9MFY17. Lastly, other small divisions (biotechnology and downstream manufacturing) are expected to have similar financial performances in 4QFY17 against 4QFY16. Earnings estimate maintained. We maintain our FY17 CNI of RM337 million. We also maintain our FY18 CNI of RM385 million. 

Maintain “buy” with a TP of RM12.60: Our TP is based on a sum-of-parts valuation. We continue to like Genting Plantations due to its robust 17% FFB growth in FY17. Looking ahead into FY18, we expect its FFB growth to stay strong due to its young age profile. — MIDF Research, Feb 12. 


 

      Print
      Text Size
      Share