Period  4Q13/ FY13

Actual vs. Expectations Genting Plantation (GENP)’s FY13 core net profit* (CNP) of RM329m is better than expected as it makes up 122% of consensus forecast (RM270m) and 118% of ours (RM279m). Note that we have excluded a one-off charity contribution of RM35m and unrealized forex loss of RM67m.

 We believe GENP has increased its efficiency in managing its cost during the tough time of low CPO prices in FY13.

Dividends  As expected, no dividend was announced.

Key Results Highlights YoY, FY13 CNP is flat at RM329m as stronger EBIT growth from property division (+128% to RM91m) was neutralised by lower EBIT in plantation division (-22% to RM297m). Note that CPO price was down 15% to RM2378/mt.

 QoQ, 4Q13 CNP improved 69% to RM127m due to seasonally higher FFB production (+20% to 463k mt) and better CPO prices (+6% to RM2505/mt).

Outlook  FY14E CNP should improve in line with better CPO prices, which have recently surpassed RM2800/MT.

Change to Forecasts FY14E CNP is increased by 1% to RM395m while FY15E CNP is raised by 1% to RM400m. We have also assumed lower general cost.

Rating Upgrade to MARKET PERFORM

Although we have turned more positive on GENP, its stretched valuation with Fwd. PE of 20.2x may cap the share price upside to below the RM11.00 level.

Valuation  Upgrade our Target Price to RM10.85 based on Sum-of-Parts. We have increased our Target Fwd. PE for its plantation division to 19.5x (from 18.5x) as we now applied +0.5SD valuation (previously at mean) over 5-year Fwd. PE. The higher valuation reflects its good cost management and our bullish view on CPO prices.

Risks to Our Call

 Lower than expected CPO prices.

 Lower-than-expected earnings from property division.

Source: Kenanga