Period  3Q13/ 9M13

Actual vs. Expectations Genting Plantation (GENP)’s 9M13 core net profit of RM203m is in line as it makes up 72% of consensus forecast (RM281m) and 73% of ours (RM279m). Note that we have excluded a oneoff charity contribution of RM35m and unrealized forex loss of RM45m.

Dividends  As expected, no dividend was announced apart from the previously announced special interim cash dividend of 44 sen less 25% income tax. Note that shareholders have the freedom to take the whole 44 sen dividend or to reinvest some or all the net dividends to subscribe to the warrant. Note that this has gone ex recently on 19-Nov- 2013 and GENP shareholder has until 9-Dec-2013 to choose whether to utilize the dividend to subscribe for the warrant. Refer to details of the corporate exercise in Page 2.

Key Results Highlights  YoY, 9M13 core net profit declined 16% to RM203m as CPO prices was down 24% to RM2325/mt. However, this is mitigated by a 14% increase in FFB volume to 1.06m mt and stellar earnings from property division (EBIT +171% to RM59m).

 QoQ, 3Q13 core net profit improved 65% to RM75m due to seasonally higher FFB production (+24% to 386k mt).

Outlook  While the Company’s long-term growth outlook remains intact, we believe that its share price should decline once the excitement on the corporate exercise fades after mid-Dec 2013.

Change to Forecasts We maintain core net profit estimate of RM279m and RM363m for FY13E and FY14E respectively.

Rating Downgrade to UNDERPERFORM

GENP currently is valued by the market at 22.5x FY14 PER which is the highest in the sector. For comparison, it is even higher than big cap planters which only trade at Fwd. PER valuation below 21x. Given its smaller market cap, we do not think that GENP’s current valuation is justified in the long run. Hence, we downgrade our call to UNDERPERFORM as we think that investors may have been over-reacted to the recent corporate exercise.

Valuation  We maintain our Target Price of RM9.35 based on Sum-Of-Parts.

Risks to Our Call   Better than expected CPO prices.

 Better-than-expected earnings from property division.

Source: Kenanga