MYR13/sh RNAV; raise to BUY. GENP’s market cap of MYR6.4b has merely priced in its growing palm oil assets. What investors over-looked is GENP’s ~6,600 acres of prime land bank worth MYR4b in Iskandar and Sepang. Investors of GENP today thus get its Iskandar landbank for free. We upgrade GENP to a BUY with a raised TP of MYR10.30 on a higher 18x PER target on mid-FY14 earnings (+1SD of 5-year mean PER). Our new TP is still 20% below our estimated RNAV of MYR13.

What has changed? Slightly over a year ago (Nov 2011), GENP’s Johor Premium Outlet (JPO) opened for business and quickly became a new landmark. Of greater significance is a new inter-change connecting the North-South Highway to the JPO and GENP’s remaining ~5,550 acres of undeveloped-cum-plantation land; this has improved accessibility and land value. An upcoming AEON mall in Kulaijaya (by end-2013) will add credence and value. On a bigger picture, 2013 is a turning point for Iskandar M’sia as investments and property demand pick up. Land prices have risen steadily but not GENP’s share price.

The overlooked landbank. GENP owns ~43,000 acres of freehold plantation estates in Peninsular Malaysia since 1980s (which are still kept at historical BV of <MYR1psf). These are easily accessible along the North-South Highway. The jewel among its land bank is over 7,000 acres of land in Iskandar where the JPO is located. Another prime land is its ~1,000 acres Sepang land, located next to the Sepang F1 Circuit. GENP’s other landbank (near Batu Pahat, Malacca, and Sg Petani in Kedah) are also ripe for development but demand is generally slow.

Ripe for a re-rating, BUY. Valuing its Iskandar and Sepang land at MYR14psf, we derive a value of MYR4b for these land. Combined with its upstream plantation value (MYR5.6b) and cash (MYR0.3b), GENP’s RNAV is c.MYR9.9b or MYR13/sh. Although property only account for less than 10% of GENP’s net profits, its Iskandar land bank and intrinsic value should not be ignored. The twin benefits of Iskandar’s rising appeal and our projected 9% 2012-15 CAGR in FFB output (higher than its Malaysian peers) add to GENP’s appeal.

Source: Maybank Research - 06 Mar 2013