This article first appeared in The Edge Financial Daily on July 24, 2018
Genting Plantations Bhd
(July 23, RM9.47)
Maintain buy with an unchanged target price (TP) of RM11: We visited Johor Premium Outlets (JPO), which is a 50:50 joint venture (JV) between Genting Plantations Bhd and Simon Property Group. The company which owns JPO is called Genting Simon Sdn Bhd. Recall that JPO is Malaysia’s first premium outlet and it opened its doors to the public on Dec 11, 2011. Following the success of Phase 1, JPO Phase 2 expansion was completed on Nov 15, 2013. It has more than 130 designers and brand-name stores offering savings of up to 65% every day.
In view of its high occupancy rate exceeding 90%, Genting Simon has decided to expand JPO. We gather that JPO Phase 3 will add another 40,000 to 50,000 sq ft of net lettable area (NLA) and the target completion date is by end of 2018. Overall, JPO sits on 45 acres (18.2ha) of land and currently it has NLA of 269,000 sq ft.
In financial year 2017 (FY17), Genting Simon contributed profit before tax (PBT) of RM30.3 million (or 6.6% of Genting Plantations’ PBT). This is a significant improvement of 44% year-on-year (y-o-y). Note that Genting Simon’s PBT includes the profit from both JPO and Genting Highlands Premium Outlets.
We maintain our FY18 core net income (CNI) forecast of RM302 million as the information that we gathered has been factored in previously. We also maintain our FY19 CNI forecast of RM347 million. Key assumptions are average crude palm oil price of RM2,400 and RM2,430 for FY18 and FY19.
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 contribution from recently acquired estates of 12,893ha and 5,000ha coming to maturity in Indonesia. In the first half of FY18, Genting Planations’ FFB volume grew by 12% y-o-y to 965,035 tonnes. — MIDF Research, July 23