We visited GENP's estate (Genting Indah Estate) and award-winning oil mill (Genting Indah Oil Mill), situated in the Tongod region of Sandakan, Sabah. Management target to achieve full mechanisation by 2020. Trim FY18E CNP by 19% to RM252m after reducing FFB estimate from 2.30m MT to 2.16m MT but maintain FY19E CNP of RM423m as existing FFB forecast of 2.39m MT (+11%) appears achievable. BUY with a TP of RM10.80 or at a FY19 PER at 21.9x, which reflects its FY19 FFB growth prospects of 11 %. We continue to like GENP for its above-average CY19E FFB growth of 11 % vs. industry average of 5%; and stable earnings contribution from GPO and Johor Premium Outlets (JPO) in the form of associate and JV profits. The third phase of JPO is scheduled to be opened by end of 2018, which would boost GENP's Property performance further in FY19. 

GIDE's infield FFB collection and evacuation processes are mostly mechanised - using mechanical equipment to load harvested FFB and subsequently carry and evacuate them onto a designated platform. From GENP's study, these equipment can increase average productivity per harvester to 2-4MT of FFB/day from 1.5MT using a traditional wheelbarrow. 

Management expects the Tongod region to achieve FFB production of 3.30MT/ha in November (+10% from 2.99MT/ha in October), and peak at 3.5MT/ha in December. The Tongod region consists of three estates, namely GIDE, Genting Permai Estate and Genting Kencana Estate, with an aggregate planted area of 7.4k ha (c.5% of GENP's total planted area). 

The group's FFB production could peak in December and management has guided that FFB growth in FY18 should be at 15% markedly below our current forecast of 22%. As such, we cut our FFB estimate from 2.30m MT to 2.16m MT (+15% YoY) but maintain our FY19E CNP of RM423m as our existing FFB forecast of 2.39m MT (+1 1 %) appears achievable. 

Source: Rakuten Research - 19 Nov 2018