- Maintain BUY on Genting Plantations Bhd (GenP) with an unchanged fair value of RM11.60/share. Our fair value implies an FY16F fully-diluted PE of 25x.

- GenP’s 1QFY15 core results (excluding forex loss of RM17.6mil on US$ borrowings) were below consensus estimates but within our expectations.

- Property division recorded an 89.9% YoY expansion in EBITDA in 1QFY15 on the back of a 73.1% increase in revenue. The property unit recorded a RM20mil gain on disposal of the Genting Permaipura project in Kedah, which includes a golf club, residential units, and agricultural land. Going forward, GenP may be recognising another gain on 20 acres of land in Batu Pahat, which was sold to Aeon Bhd. The quantum of the gain was not disclosed.

- We understand GenP’s FFB production may be affected in 3QFY15 or 4QFY15 due to the drought in Sabah, which took place from February to May 2015.

- The weather has been erratic in Sabah. It swung from being very wet in January to extremely dry from February onwards. Rainfall in Sabah was less than 100mm in February while in April, the amount of rainfall was only 86mm. We gather that the weather was still dry in Sabah in May.

- We gather that GenP’s FFB production growth in Indonesia could have been higher than 23% YoY in 1QFY15 if not for the blockades carried out by the villagers. The villagers were demanding compensation for their land from GenP. Less than 5% of GenP’s planted areas in Indonesia were affected by the blockades.

- We understand that blockades are common in Indonesia and GenP is managing the issue carefully. We also gather that the current wet weather in Kalimantan has affected harvesting and transportation of fruits.

- Overall, GenP is expecting FFB production to grow by 10% in FY15F barring unfavourable weather. FFB output in Malaysia is expected to be flat while the Indonesia unit is forecast to record a 46.5% increase in FFB production.

- Production costs in Malaysia are expected to be more than RM1,200/tonne in FY15F compared with RM1,178/tonne FY14. Fertiliser costs are envisaged to increase by 8% to 9% in FY15F due to the depreciation of the Ringgit and Rupiah against the US$.

- Production cost of the Indonesia plantation unit was about RM2,000/tonne in 1QFY15 while the Malaysia division recorded a production cost of RM1,330/tonne.

Source: AmeSecurities Research - 28 May 2015