Highlights

Genting Plant. made two proposals yesterday:

1. Declare a special interim cash dividend of 44 sen (less 25% tax); and

2. Restricted non-renounceable issue of warrants on the basis of 1 warrant for every 5 existing shares held at a maximum issue price of RM1.65 per warrant.

The proposals are expected to complete in 4Q13.

Financial impact

The latest proposals will have no impact to its balance sheet, as outlay from the special cash dividend will be replenished by proceeds from the issuance of warrants.

Pros/ Cons

Positive, as it would benefit investors whereby shareholders do not need to pay for the warrants for they are effectively given for “free” (cash dividend paid is re-invested to purchase the non-renounceable warrants).

Forecasts

Maintained.

Risks

• Earlier-than-expected recovery in edible oil demand and prices; and
• Weather uncertainties revisit, which would have a positive impact edible oil prices.

Rating

HOLD

Negatives – (1) Weak global economic outlook and impending excess supply of CPO will affect both demand and prices of CPO; and (2) Demanding valuation.

Positives – (1) Increasing contribution from oil palm in Indonesia; (2) Strong balance sheet; and (3) Potential upside surprises to earnings from JPO.

Valuation

SOP-derived TP maintained at RM10.31 (see Figure 1). While valuation seems more appealing following the recent selldown, we are keeping our HOLD call on the stock for now pending a review of our average CPO price assumptions (with downward bias). Our sensitivity analysis indicates that every RM100/tonne change in our CPO price assumption will result in a 5% change in our TP.

Source: Hong Leong Investment Bank Research - 30 Aug 2013