Stock Name: GENP
Company Name: GENTING PLANTATIONS BERHAD
Company Name: GENTING PLANTATIONS BERHAD
| Research House: OSK | Price Call: BUY | Target Price: 10.13 |
THE BUZZ
Genting Plant has entered into an agreement to acquire astake in a joint venture (JV) withGlobal Agrindo Investment Company Ltd to cultivate 74,390ha of oil palmplantation land in Central Kalimantan. The company will fork out USD116.0m (RM356.5m) for a 63.2% stake in the JV, and will ultimatelyhold 60.0% of the Indonesian assetsafter taking into account the minority stakes in several subsidiaries. Ofthe total landbank, 14,150ha of nucleus area and 4,195ha of plasma area havebeen planted.
OUR TAKE
The JV will increase Genting Plant's total landbank in Malaysia and Indonesia from165.6k ha to 240.0k ha while boosting the planted area in Indonesia to about48.1k ha. As there is no visibility on the age profile of the 14,150ha planted,we are not factoring this into our earnings forecasts as yet. The acquisitionof the stake in the JV is expected to be completed by the end of 2Q this year.
Genting Plant had RM589.8m in net cash as at end-CY11. After paying RM356.5m for its JV stake, it will still beholding net cash, and assuch the deal will not stretch its balance sheet.
In terms of purchase price, Genting Plant's 60% stake for USD116.0m implies an enterprise value of USD193.3m. The14,150ha of planted area alone is worth USD169.8m,assuming that these plantations have young treesand the pricing is USD12k per planted ha. Thus, we deem the purchase priceinexpensive.
Maintain Buy on Genting Plant, with its FV at RM10.13.
Source: OSK188
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