INVESTMENT HIGHLIGHTS

• Slight earnings miss in 1HFY18

• 1HFY18 earnings was affected by low CPO price

• Earnings estimate reduced slightly

• Maintain BUY with slightly lower TP of RM10.70

1HFY18 core earnings below expectations. Genting Plantations Berhad (GENP) 1HFY18 core net income (CNI) of RM109.9m was below expectations as it makes up only 36% and 32% of ours and consensus’ full year forecasts. Margin for property segment has been lower than expected as GENP focus on lower margin products in 1HFY18 (against 1HFY17). In our CNI calculation, we have excluded RM14.4m net surplus arising from Government acquisition of land, RM3.2m of forex gain and RM0.4m other one-off items. As expected, a 4.75 sen was announced (ex-date: 13-Sep).

1HFY18 earnings was affected by low CPO price. 1HFY18 CNI is lower by 27%yoy to RM109.9m due to weaker CPO price (-18%yoy to RM2336 per tonne). Operationally, FFB volume growth remains strong in the 1HFY18 with 12%yoy growth to 965k tonnes as its young Indonesia estates delivered high FFB growth of 39% yoy.

Earnings estimate reduced slightly. We have reduced our FY18 CNI forecast by 6% to RM284m. For FY19, we trim our FY19 CNI forecast by 3% to RM337m. We have assumed lower margin for property division. Despite the earnings cut, we still expect GENP to deliver a stronger 2H18 earnings against 1H18 as FFB production are expected to increase seasonally in the 2H. This should bode well for its plantation division.

Maintain BUY with slightly lower TP of RM10.70. Our TP is based on Sum-of-Parts (Refer Page 2). Despite the slight earnings miss, we continue to like the Company as we are optimistic on its plantation division. We reiterate our view that GENP FFB growth should improve 13%yoy and this is at the first quartile of planters under our coverage. The growth driver is due to new contribution from acquired estate of 12,893 ha and 5,000 ha coming to maturity in Indonesia.

Source: MIDF Research - 29 Aug 2018