INVESTMENT HIGHLIGHTS

• 1QFY17 earnings within expectations

• Weaker sequential earnings

• Higher earnings in 1QFY17

• Maintain Neutral with unchanged TP of RM11.55

1QFY17 earnings within expectations. Genting Plantations Berhad (GENP) 1QFY17 core net income of RM82.2m was within expectations, meeting 24% and 23% of our and consensus full year forecast. As expected, no dividend was declared for the quarter.

Weaker sequential earnings. On a sequential basis, core net income for 1QFY17 dropped by 38.1%qoq to RM82.2m, mainly due to lower contribution from plantation division and property division. Profit before tax (PBT) of plantation division eased 34.9%qoq, primarily due to seasonally lower FFB production (-24%qoq) despite CPO prices recovered by 7%qoq to RM3053/mt. Meanwhile, PBT of property division fell 63%qoq due to lower earnings recognition from property projects in Johor.

Higher earnings in 1QFY17. On a yearly basis, 1QFY17 core net profit grew 130%yoy, driven mainly by better performance of plantation division which offset weaker earnings of property division. PBT of plantation division increased by 130%yoy, underpinned by higher CPO prices (+34%yoy) and higher FFB production (+29%yoy). Looking ahead, management is looking at production growth rate of double digit in FY17, which is in line with our production growth estimate of 13% for FY17. On the other hand, PBT of property division fell 59%yoy due to soft property market in Johor. Meanwhile, soft launch of GENP’s second Premium Outlets, Genting Highlands Premium Outlets is targeted to be in June 2017.

Maintain Neutral with unchanged TP of RM11.55. We maintain our earnings forecast for FY17/18. Also intact is our TP of RM11.55, based on sum-of-parts valuation. We maintain our Neutral recommendation of GENP due to its rich valuation which offset its positive FFB production outlook. GENP is trading at forward PER of 27.2x of FY17 EPS or premium against IOICORP’s 24.8x and KLK’s 22.6x.

Source: MIDF Research - 30 May 2017