This article first appeared in The Edge Financial Daily on April 26, 2018

Genting Plantations Bhd
(April 25, RM9.78)
Maintain buy with an unchanged target price (TP) of RM12.00: We recently visited Genting Highlands Premium Outlets (GHPO), which is a 50:50 joint venture between Genting Plantations Bhd and Simon Property Group. Recall that GHPO is Malaysia’s second premium outlet after Johor Premium Outlets and it opened its doors to the public on June 15, 2017. GHPO sits on 600,000 sq ft of land with a net lettable area of 270,000 sq ft. It has more than 150 designer and brand-name stores offering savings of up to 70%.

We return from the trip feeling positive about GHPO’s prospects as we gather that it has achieved 99% occupancy rate. There is also a potential for expansion as GHPO still has 300,000 sq ft of land available. Based on the good footfall and high occupancy rate, we believe that GHPO may start Phase 2 expansion in either 2020 or 2021.

In financial year 2017 (FY17), Genting Simon Sdn Bhd contributed a profit before tax (PBT) of RM30.3 million (or 6.6% of Genting Plantations’ PBT). This is a significant year-on-year (y-o-y) improvement of 44%. Note that Genting Simon’s PBT includes profits from both GHPO and Johor Premium Outlets.

We maintain our FY18 core net income (CNI) forecast of RM346 million. We also maintain our FY19 CNI forecast of RM379 million. Our earnings estimates are maintained as the information that we gather has already been factored in. Our TP is based on sum-of-parts. We like the company as we expect its fresh fruit bunch (FFB) growth of 13% y-o-y to be the strongest among planters under our coverage. This is due to new contributions from recently acquired estates of 12,893ha and 5,000ha coming to maturity in Indonesia. In first quarter of FY18, Genting Plantations’ FFB volume grew by 20% y-o-y to 485,510 tonnes. — MIDF Research, April 25