We are maintaining our Buy call on Genting Plantations(Genting Plant) with fair value raised mildly to RM10.13 based on sum-of-partsvaluation. Though upside appears somewhat limited in the near term, we believe stock price willbe well supported by the prospects of long term production growth coming fromits estates in Indonesia, which started to contribute in 2011. In another quarter's time, when we roll ourvaluation horizon to 12 months to June 2013, our fair value will be raisedfurther to RM10.46.
Results withinexpectations. Genting Plant's coreearnings came in at RM439.7m, which was very close to our forecast of RM436.9mand consensus forecast of RM445.0m. The surprise in the results was the specialdividend announced amounting to 6.25 sen on top of final dividend of 5.75 sen.
New planting.Achieved 1,667 ha of new planting in 4Q, bringing its total new planting to4,509 ha for CY11. With that Genting Plant now has a total nucleus planted areaof 33,922 ha in Indonesia. On top of that, a total of 334 ha of plasma areahas been planted. New planting targetfor CY12 is 7k ' 8k ha.
Production. FFBproduction amounted to 1.372m tonnes with very minimal 24k tonnes fromIndonesia. The 14.6% growth for CY11 has largely been driven by yield recovery andnew areas coming into production in Malaysia. Management continues to guide for100k tonnes of FFB growth, largely from its Indonesian plantations.
Indonesia could turnprofitable in 2H. Indonesian operation made a loss of RM15.9m, wider thanRM11.5m loss in FY10. Based on current CPO price, Genting Plant's Indonesiaoperation will continue to be loss-making due to the still low yields of young palms.
Forecast change.We tweak up our FY12 forecast slightly from RM395.7m to RM399.3m, factoring inhigher FFB production of 1.462m tonnes. We are also introducing our FY13forecast of RM431.3m, based on average CPO price of RM3,100. Our fair value israised slightly to RM10.13 compared to RM10.05 previously. Our revised FV givesan upside of 9.5%. Maintain Buy.