This article first appeared in Capital, The Edge Malaysia Weekly on May 22, 2017 - May 28, 2017

SIX years after Johor Premium Outlets (JPO) opened its doors, Genting Plantations Bhd (GenP) is set to unveil its second such shopping centre, dubbed Genting Highlands Premium Outlets (GHPO), at the hill resort that is synonymous with the Lim family.

The opening of Southeast Asia’s first hilltop premium outlet, likely by the end of next month, is seen as a boost for GenP and its warrant, GenP-WA.

GenP-WA can be an alternative for investors looking for a leveraged entry into the stock.

The warrant, which has a RM7.75 strike price and one-to-one conversion ratio, expires in about two years, on June 17, 2019.

Issued in 2013 at RM1.65, GenP-WA closed at RM3.80 last Wednesday. At that price, it was trading at a slight discount of 1.1% to the mother share, which closed at RM11.68 last Wednesday. GenP-WA would theoretically be worth 3.4% more, at RM3.93, assuming zero premium to the underlying shares.

A quick check on Bloomberg shows that analysts are split on just how much upside there is for GenP — four research houses have a “buy” call versus one with “sell”, while 16 others recommend “hold”. Their target prices range from RM10.19 to RM12.90, averaging at RM11.72 apiece, which is slightly above what the stock fetched last Wednesday.

GenP-WA would theoretically be worth 4.5% more, at RM3.97, if its mother share hits the consensus target price. The upside potential for GenP-WA is higher at 35.5% to RM5.15, if the mother share can rise 10.4% to RM12.90.

GenP currently trades at a 24.91 times historical earnings and 25.23 times forward earnings.

Hong Leong Investment Bank Research analyst Chye Wen Fei, for one, is bullish about GHPO’s opening.

“[We expect GHPO] to perform as well as JPO, if not better, as it will be serving a more diverse group of shoppers vis-à-vis JPO. This is due to its close proximity to the Genting Integrated Tourism Plan and Klang Valley,” Chye says in a April 25 note, reiterating a “hold” recommendation with a higher target price of RM12.21, from RM12.02 previously, to reflect upward adjustments to core net profit forecasts. FY2017-19 core net profit forecasts were raised 4.5%, 9.1% and 8.1% respectively to account for higher joint-venture earnings assumptions, underpinned by the opening of GHPO.

GHPO will have a gross leasable area of 275,000 sq ft, with 150 stores selling designer and branded products.

Chye also likes the young age profile of GenP’s oil palm and its healthy balance sheet, but opines that GenP’s near-term upside is capped by the recent downtrend in palm prices and the persistently weak property sentiment in Johor.

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