Period  4Q14/FY14

Actual vs. Expectations  Genting Plantations (GENP)’s FY14 core net profit* (CNP) of RM382m exceeded expectations making up 122% of consensus forecast (RM313m) and 131% of ours (RM291m).

 However, we wish to highlight that management mentioned during the conference call briefing that the property division sold a 164 acre piece of industrial land for RM143m that that resulted in an RM85m profit. Excluding the one-off land sale, CNP would come in within expectations at RM297m.

Dividends  A special dividend of 3.0 sen and final single-tier dividend of 4.0 sen was announced, raisng full-year total to 10.0 sen dividend (against our and consensus expectation of 9.0 sen and 11.0 sen, respectively).

Key Results Highlights  YoY, FY14 CNP rose 16% to RM382m due to strong EBIT growth in the plantation division (+34% to RM399m) which benefitted from higher FFB volume (+9% to 1.7m MT) and better PK prices (+26% to RM1,667/MT). Meanwhile, the Property segment also registered strong EBIT growth (+71% to RM155m) due to the aforementioned one-off land sale.

 QoQ, 4Q14 CNP doubled to RM145m (from RM70m) mainly due to the one-off land sale which increased Property EBIT by 210% to RM88m. Meanwhile the Plantation segment also registered 18% growth due to higher FFB volume (+10% to RM473m) and margin improvement from 32% to 35%.

Outlook  We are neutral on plantations outlook as we expect CPO prices to weaken in 2H15 towards our target RM2,200/MT due to weak oil prices, declining soybean oil prices and a weak Ringgit. However, this could be partially offset by GENP’s good FY15E FFB growth prospects of 11% (higher than sector average of 6%).

 Nevertheless, we think GENP’s valuation at 23.6x Core FY15E PER may signal that the market has fully priced-in GENP’s near-term growth prospects.

Change to Forecasts  In view of the strong FFB volume growth seen, we increase our FY15E Group FFB production estimate to 1.90m MT from 1.76m MT (+8%) and introduce our FY16E estimate of 2.36m MT. Hence, we increase our FY15E CNP by 9% to RM329m and introduce our FY16E CNP of RM365m.

Rating Maintain UNDERPERFORM

Valuation  We raise our SoP-based TP to RM9.57 (from RM9.20) on the back of higher plantation earnings, Despite its lower market cap, GENP’s Fwd. PE valuation of 23.6x is close to or higher than some big cap planters such as SIME (19.2x Fwd. PER) and KLK (23.9x Fwd. PER). Even with our higher TP, we think implied valuations are quite stretched and thus, we reiterate our UNDERPERFORM view.

Risks to Our Call  Better-than-expected CPO prices.  Higher-than-expected earnings from property division. 

Source: Kenanga