• Genting Plantations (GenP) has proposed to acquire 80ha of land in Sentul City, Bogor, West Java for Rp1,764bil (RM509.8mil) and 72ha contiguous land for Rp288bil (RM83.2mil). The sellers of the land are PT Sentul City and its related companies. PT Sentul City is owned by Indonesians.

• We positively view the proposed acquisition as the location of the land is strategic. The land is located 1.8km to the east of AEON Sentul City shopping mall and IKEA. Sentul City is an established township with a population of more than 30,000 residents. Hence, we believe that GenP would not face problems selling its properties.

• Currently, GenP’s main property projects are Genting Indahpura in Kulai and Pura Kencana in Batu Pahat. Property development accounted for 8.3% of FY23 pre-tax profit.

• The purchase consideration for both parcels of land translate into Rp1,350,000/sq m or Rp125,419/sq ft (RM36/sq ft). The acquisition cost was arrived at after considering the market value of the land ascribed by an independent valuer of Rp1,430,000/sq m or Rp132,851/sq ft (RM38/sq ft). We reckon that the purchase consideration is fair.

• Assuming 60 houses are built in 1ha, this would come up to about 9,120 houses on the 152ha of land. Assuming an average selling price of RM500,000/unit, the GDV of the land could come up to RM4.6bil. Assuming a net profit margin of 20%, the project could be generating a net profit of RM920mil or RM46mil/year over 20 years. This would be about 15% of GenP’s FY25F net profit. The Sentul City land has been earmarked for a mixed-use development project.

• As the proposed acquisition of the land would only be completed in 1QFY25, we believe that the project at Sentul City can only be launched in FY26F, earliest. GenP is not expected to face issues financing the RM593mil acquisition as its balance sheet is healthy. Net gearing stood at 18.9% as at end-FY23. Gross cash was RM1.1bil.

• We maintain BUY on GenP with a fair value of RM6.80/share, which is based on a FY25F PE of 18x. GenP is currently trading at a FY25F PE of 15.5x, which is below its 5-year average of 17x.

Source: AmInvest Research - 22 Jul 2024