GENP’s 1Q17 core net profit of RM83.8m (>100% yoy) was within our expectations. Stronger earnings were due to higher FFB production and CPO ASPs. We leave our 2017-19E earnings unchanged post the 1Q17 results. As we roll over our valuation basis to 2018E EPS, we raise our TP to RM13.35 and upgrade GENP to BUY, from HOLD.

1Q17 Revenue Increased by 53.4% Yoy

Genting Plantations (GENP) reported a higher 1Q17 revenue by 53.4% yoy to RM400.2m, mainly because of higher contributions from the upstream plantation and downstream manufacturing divisions (maiden sales of its refined-palm products following commencement of its refinery operations in Lahad Datu in early 2017 along with higher biodiesel sales), but partially offset by lower property sales. Upstream plantation and downstream manufacturing divisions revenue increased yoy by 25.3% and >100%, respectively, to RM253.5m and RM125.9m, while the property division’s revenue fell by 40.6% yoy to RM20.8m. The blended CPO and PK ASPs were higher at RM3,053/MT (1Q16: RM2,273/MT) and RM3,097/MT (1Q16: RM1,866/MT), respectively, while FFB production increased by 28.6% yoy to 405k MT. PBT in 1Q17 more than tripled yoy to RM122.5m.

Core Net Profit Rose to RM83.8m, Within Expectations

After adjusting for one-off items, 1Q17 core net profit more than doubled yoy to RM83.8m, accounting for 20.1% and 22.9%, respectively, of our and consensus 2017E forecasts. We deem this to be in line with our expectations as we expect stronger quarters ahead.

Upgrading to BUY With a New TP of RM13.35

We leave our 2017-19E core EPS unchanged post the 1Q17 results. Also, our CPO ASP assumption remains at RM2,600/MT. We expect higher FFB and CPO production to drive earnings growth over 2017-19E. We raise our 12-month target price for GENP to RM13.35 (from RM11.88), as we roll forward our valuation basis to 2018E EPS (from 2017E), using an unchanged 22x PER. Given the 15.1% upside to our new target price, we upgrade GENP to BUY, from HOLD. Key risks to our call include: 1) a weaker-than-expected recovery in the global economy; 2) lower vegetableoil and crude-oil prices; 3) weaker-than-expected FFB and CPO production; and 4) adverse changes in policies

Source: Affin Hwang Research - 30 May 2017