Genting Plantations; Hold;
Price Target: RM9.00; GENP MK

Pursuant to GENP’s proposed JV with Sin Tek Huat Group announced in Apr12, GENP announced that both parties have mutually terminated the conditional sale & purchase agreement for the acquisition of 95% stake in PT Globalindo Sawit Lestari (PT GSL) due to non-fulfillment of certain conditions. To recap, PT GSL owns 16.3k ha of green field plantation land with Izin Lokasi (location permit).

Nonetheless, GENP and Sin Tek Huat Group have signed a new sale & purchase agreement to acquire 95% of PT United Agro Indonesia (PT UAI) which owns 6.5k ha of plantation land with Izin Lokasi for US$265k (~RM821.5k) cash, implying US$42/ha which seems attractive.

There is no change to our forecast as we did not impute the proposed acquisition of PT GSL earlier on. Our model has only incorporated the 62.5k ha of land bank (unconditional in Oct12) owned via GENP’s effective 60% stake in the JV with Sin Tek Huat Group. It has increased its land bank by 38% from 165k ha to 228k ha. This compares to its estimated planted area of 113k ha in FY12, implying significant plantable reserves (50% of land bank) for future expansion.

Maintain HOLD with SOP-derived TP of RM9.00. We continue to like GENP for its aggressive expansion in Indonesia which will underpin its future growth prospects (3-year FFB volume CAGR of 15%). However, at current price we believe the counter offers a mere 4% upside to its estimated fair value.

Source: HwangDBS Research - 1 Apr 2013