November 24, 2011

Maybank Research maintains Sell on Genting Plantations, TP RM6.70

Stock Name: GENP
Company Name: GENTING PLANTATIONS BERHAD
Research House: MAYBANKPrice Call: SELLTarget Price: 6.70



KUALA LUMPUR (Nov 24): Maybank Investment Bank Research said Genting PLANTATION []s' nine-months net profit of RM348 million (+64% on-year) accounts for 83% and 78% of its and consensus full year forecast.

It said on Thursday the results positively surprised on stronger-than-expected fresh fruit bunches (FFB) production.

'We raise 2011 net profit forecast by 3%, 2012-13 by 11%. Despite the stellar results, we maintain Genting Plantations as a Sell on relatively rich valuation at 17.3x 2013 PER. Our TP is raised to RM6.70 (+10%) following the earnings revision, based on unchanged 14.5x 2013 PER,' it said.

Maybank Research said Genting Plantation's earnings from the plantation segment appeared to have peaked in 2Q11 with 3Q11 EBITDA declining by 19.7% on-quarter (+37% on-year) due to sluggish crude palm oil (CPO) average selling price (ASP) of RM3,097 a tonne (-8% on-quarter,+ 17% on-year) that offset the marginally higher FFB production (+0.9% on-quarter, +14% on-year). Meanwhile, property contributed a minor RM2.7 million in 3Q11 (-7% on-quarter, +5% on-year).

The research house said the nine-month plantation EBITDA surged 61% on-year driven by higher CPO ASP of RM3,340 (+29% on-year) and robust fresh fruit bunches (FFB) production (+13% on-year), attributable to stronger-than-expected FFB yields from its Peninsular Malaysia estates.

'Hence, we raise our 2011-13 FFB production forecast by 2.7-4.5%, positively impacting our 2011-2013 net profit forecasts by 3%-11%. We expect FFB production to trend down in 4Q11 after its seasonal peak in 3Q11,' it said.

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