News  Genting Plantations (“GENP”) has proposed a special interim cash dividend of 44 sen less 25% income tax.

 The Company also proposed a non-renouncable restricted issue of up to 151.8m new warrants at an issue price of RM1.65 per warrant. This will be on the basis of 1 warrant for every 5 existing shares with an exercise price at RM7.75 per share. The warrants tenure will be 5.5 years from the date of issuance.

 Both the exercises are inter-conditional with one another. Hence, the dividend will only become unconditional once the warrant issuance obtained all the necessary approvals. The entitlement date for both exercises will be the same to be announced later.

 Note that shareholders have the freedom to take the whole 44 sen dividend or to reinvest some or all of the net dividends to subscribe to the warrant.

 The completion date is expected to be in 4Q13.

Comments  We are positive on the deal as shareholders can enjoy the 44 sen dividend in the near term. In addition, the option to reinvest the special dividend is an added bonus for long-term investors to continue investing in GENP.

Outlook  Short-term share price should react positively due to improved investors’ sentiment on GENP. However, long-term outlook will still hinge on CPO prices movement.

Forecast  Maintaining our FY13E-FY14E core earnings of RM279m-RM363m. However, FY13E dividend has been increased to 52.0 sen (from 8.0 sen).

Rating Upgrade to OUTPERFORM

 After increasing our Net Dividend Per Share by 44.0 sen to 52.0 sen, net dividend yield is now 5.8%. Coupled with the upside of 4.7%, the total return is now 10.5%. Accordingly, we upgrade our recommendation to OUTPERFORM.

Valuation  Maintain our TP of RM9.35 based on Sum-Of-Parts.

Risks  Worse than expected CPO prices.

 Worse than expected sales and profit margin from the property division.

Source: Kenanga