Genting Plantations; Hold; RM8.93
Price Target: RM9.70; GENP MK

GENP announced yesterday that it proposed to declare a special interim cash dividend of RM0.44 (less 25% tax) and the restricted issue of warrants (non-renounceable) at RM1.65 issue price on the basis of 1 warrant for every 5 GENP shares. The proposals are inter-conditional with one another and are subject to the approvals of GENP shareholders. The deal is expected to be completed in 4Q13.

GENP shareholders have the option to re-invest some or all of the entitled dividends into the GENP via subscription of warrants, similar to a dividend reinvestment scheme (with no cash outlays). The proceeds will amount to ~RM250.4m (should all shareholders elect to reinvest) and will be utilised for businessrelated expenses and expansion plans. As at Jun13, GENP has a solid cash pile of RM930m (RM134m net cash) which will help to fund the proposed special interim cash dividend.

We are neutral on the proposals though we are wary that the proposed warrants may result in EPS dilution when they are exercised over the 5.5-year tenure (RM7.75 exercise price or lower). Nevertheless, we retain our earnings forecast for now, pending completion of the deal in 4Q13.

We expect GENP to achieve 3-year FFB volume CAGR of 13% following aggressive expansion in Indonesia in the last 3-4 years. We continue to like GENP for its long-term growth prospects but the counter is fairly valued as our flattish CPO price outlook will cap earnings upside. Reiterate our HOLD rating with RM9.70 TP based on DCF valuation.

Source: HwangDBS Research - 30 Aug 2013