• GENP’s FY17 PATAMI of RM337.7m came in-line with our expectation, making up 97% of our full year forecast.

• Adjusted for a net gain of RM53.8m in 2016, PBT increased 16% to RM461m on the back of 22% increase in revenue of RM1.8b, underpinned by improved performance from all segments except for property segment.

• Group FFB production increased 17% yoy in FY17, driven by Indonesia and Malaysia estates that grew by 38% and 8% respectively to 665k MT and 1.22m MT.

• On qoq basis, PBT improved significantly to RM142.1m (qoq: +31%; yoy: -45%) on account of 1) higher FFB production from Malaysia-estates, 2) 14% increase in PK selling price of RM2,537/MT, 3) higher recognition of profit from property projects, 4) improved offtake for the refinery and biodiesel products, and 5) a net surplus of RM10.6m arising from sale of land to Government.

• Maintain our TP at RM11.92 with BUY recommendation.

Earnings came in within expectation

Revenue and PBT for FY17 rose 21% and 3% respectively to RM1.8bn and RM461.1m. Adjusted for a net gain of RM53.8m in FY16 derived from the disposal of plantation land in Semenyih amounting to RM131.8m and the write-off of tangible assets of RM80.1m, group PBT in FY17 was 16% higher yoy. This was largely attributed to better plantation profit especially from Indonesia estates, which benefited from higher ASP and higher FFB production. The higher sales of biodiesel and refined palm products also aided to the increase in sales and earnings.

Banking on Indonesia estates

Earnings for group plantation segment increased 12% yoy to RM581.2m as contribution from the Plantation-Indonesia segment increased significantly. Earnings from this segment rose 63% to RM168.2m (FY16: RM103.2m). Malaysia estates’ performance was flat yoy as the positive impact of its higher FFB production was largely offset by the unrealized profit from intersegment sales. Overall, plantation’s EBITDA margin in FY17 was marginally lower at 39% vs. 41% in FY16 as the blended cost of production increased to RM1,600/MT from RM1,570/MT in FY16.

Property segment

As for property segment, the lower result was due to different sales mix. According to management, in FY17, total sales achieved (excluding land sales) increased 24% yoy to RM150m while its unbilled sales stood at RM44m as at 31stDecember 2017.

Declared special dividend of 11sen on top of proposed 9.5sen final single-tier dividend

GENP has declared a special single-tier dividend of 11sen on top of a proposed 9.5sen final single-tier dividend for FY17, bringing the total dividend for FY17 at 26sen (FY16: 21sen). Based on current market price, this translate into DY of 2.7x.

Maintain forecast

We remain positive on GENP due to the progress achieved in Indonesian estates resulting from newly mature areas and the progression of existing mature areas into higher yielding age brackets. The additional 12,893ha planted ha newly acquired in Indonesia will also aid to the growth. We keep our FY17 and FY18 earnings forecasts unchanged and maintained our TP of RM11.92 - applying a target PER of 26x (GENP’s 3- years average) on FY18 EPS. Maintain BUY.

Source: BIMB Securities Research - 27 Feb 2018