Stock Name: GENP
Company Name: GENTING PLANTATIONS BERHAD
Research House: MAYBANK
Genting Plantations Bhd
(Feb 23, RM7.88)
Maintain hold at RM7.97 with revised target price RM8.60 (from RM9.10): Net profit in 2010 of RM320 million was stronger (+36% year-on-year) on higher crude palm oil (CPO) average selling prices (ASPs) despite weaker production. The results were in line with our forecast. Going forward, we see minimal upside to Genting Plantations' share price as we expect CPO spot to normalise during 2H11. Among the large cap plantation stocks, Genting Plantations is most leveraged to CPO prices. Our revised earning and valuation estimates resulted in a lower RM8.60 target price (-5%). Maintain 'hold'.
Genting Plantations' 4Q10 recurring net profit of RM109 million (+35% quarter-on-quarter, +39% y-o-y) brings 2010 net profit to RM320 million (+36% y-o-y), 104% of our forecast. Plantation revenue in 4Q10 increased by 21% q-o-q on higher CPO ASPs of RM3,188 per tonne (+24% q-o-q, +43% y-o-y) on the back of marginally lower production (-4% q-o-q, -13% y-o-y). Overall, 2010 was a fruitful year for Genting Plantations, with 31% higher revenue y-o-y attributable to stronger CPO ASPs (+22% to RM2,717 per tonne) and marginally higher fresh fruit bunch (FFB) production (+3.4%).
Management indicated that 1Q11 production would be weaker as January 2011 FFB production of 76,295 tonnes (-17% month-on-month) was the lowest since February 2009, followed by flat production expected in February 2011. Nevertheless, management expects production to pick up after 2Q11 as the tree-stress problem dissipates and guided that 2011 FFB production could increase by 5% to 6%.
We now impute a higher 2011 CPO ASP of RM3,200 per tonne (previously RM3,000 per tonne). We believe the CPO spot will normalise from current high levels (RM3,726 per tonne) during 2H11 as palm production recovers. We retain our RM3,000 per tonne ASP forecast for 2012. Consequently, we raise 2011 net profit forecast by 11% and marginally for 2012. We also introduce our 2013 forecast.
Genting Plantations' share price has consolidated by 9% year-to-date (YTD), in line with the trend in spot prices (-9% YTD). We value Genting Plantations on a sum-of-parts basis, with the plantations on discounted cash flow (DCF), property on realisable net asset value and biotechnology at 0.5 times book cost.
Plantation accounts for RM7.73 of our new target price, which we have lowered in terms of DCF parameters. Our new target price of RM8.60 implies 15.9 times 2011 PER and 17.2 times 2012 PER. ' Maybank IB Research, Feb 23
This article appeared in The Edge Financial Daily, February 24, 2011.
Company Name: GENTING PLANTATIONS BERHAD
Research House: MAYBANK
Genting Plantations Bhd
(Feb 23, RM7.88)
Maintain hold at RM7.97 with revised target price RM8.60 (from RM9.10): Net profit in 2010 of RM320 million was stronger (+36% year-on-year) on higher crude palm oil (CPO) average selling prices (ASPs) despite weaker production. The results were in line with our forecast. Going forward, we see minimal upside to Genting Plantations' share price as we expect CPO spot to normalise during 2H11. Among the large cap plantation stocks, Genting Plantations is most leveraged to CPO prices. Our revised earning and valuation estimates resulted in a lower RM8.60 target price (-5%). Maintain 'hold'.
Genting Plantations' 4Q10 recurring net profit of RM109 million (+35% quarter-on-quarter, +39% y-o-y) brings 2010 net profit to RM320 million (+36% y-o-y), 104% of our forecast. Plantation revenue in 4Q10 increased by 21% q-o-q on higher CPO ASPs of RM3,188 per tonne (+24% q-o-q, +43% y-o-y) on the back of marginally lower production (-4% q-o-q, -13% y-o-y). Overall, 2010 was a fruitful year for Genting Plantations, with 31% higher revenue y-o-y attributable to stronger CPO ASPs (+22% to RM2,717 per tonne) and marginally higher fresh fruit bunch (FFB) production (+3.4%).
Management indicated that 1Q11 production would be weaker as January 2011 FFB production of 76,295 tonnes (-17% month-on-month) was the lowest since February 2009, followed by flat production expected in February 2011. Nevertheless, management expects production to pick up after 2Q11 as the tree-stress problem dissipates and guided that 2011 FFB production could increase by 5% to 6%.
We now impute a higher 2011 CPO ASP of RM3,200 per tonne (previously RM3,000 per tonne). We believe the CPO spot will normalise from current high levels (RM3,726 per tonne) during 2H11 as palm production recovers. We retain our RM3,000 per tonne ASP forecast for 2012. Consequently, we raise 2011 net profit forecast by 11% and marginally for 2012. We also introduce our 2013 forecast.
Genting Plantations' share price has consolidated by 9% year-to-date (YTD), in line with the trend in spot prices (-9% YTD). We value Genting Plantations on a sum-of-parts basis, with the plantations on discounted cash flow (DCF), property on realisable net asset value and biotechnology at 0.5 times book cost.
Plantation accounts for RM7.73 of our new target price, which we have lowered in terms of DCF parameters. Our new target price of RM8.60 implies 15.9 times 2011 PER and 17.2 times 2012 PER. ' Maybank IB Research, Feb 23
This article appeared in The Edge Financial Daily, February 24, 2011.
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