Period  1Q14

Actual vs. Expectations Genting Plantation (GENP)’s 1Q14 core net profit* (CNP) of RM81m is within expectation as it makes up 20% of consensus forecast (RM410m) and 21% of ours (RM395m). Note that we have excluded forex gain of RM20m in our 1Q14 CNP calculation. As for 1Q13, the oneoff charity donation of RM35m and forex loss of RM2m has been excluded.

Dividends  As expected, no dividend was announced.

Key Results Highlights YoY, 1Q14 CNP is flat at RM81m as strong core EBIT growth from plantation division (+29% to RM93m) was neutralised by lower core EBIT in property division (-32% to RM19m). Plantation division benefited from higher CPO prices of RM2659/MT (16% YoY). Property division EBIT is lower due to lower property sales at Genting Indahpura, Johor.

 We estimate that 1Q14 plantation core EBIT is RM93m after excluding forex gain of RM20m. 1Q13 core EBIT is RM72m after excluding the one-off charity donation of RM35m and forex loss of RM2m.

 QoQ, 1Q14 CNP declined 36% to RM81m due to lower core EBIT in plantation division (-34% to RM93m). We believe that plantation division is affected by seasonally lower FFB production (-19% to 377k mt).

Outlook  FY14E CNP is expected to improve by 20% YoY due to better CPO prices. However, its valuation of core PER of 21.7x may signal that the market has overshot GENP’s near term growth prospects.

Change to Forecasts Maintain FY14E-FY15E CNP of RM395m-RM400m.

Rating Downgrade to UNDERPERFORM 

Despite its lower market cap, GENP’s Fwd. PE valuation of 21.7x has exceeded some big cap planters such as SIME (16.1x Fwd. PE) and KLK (20.1x Fwd. PE). Hence, we believe that its share price is overvalued.

Valuation  Maintain our Target Price to RM10.85 based on Sum-Of-Parts.

Risks to Our Call Better-than-expected CPO prices.

 Higher-than-expected earnings from property division.

Source: Kenanga