GP’s  FY13  core  net  profit  overshot  our  and  consensus  expectations, coming  in  at  140-145%  of  both  FY13  forecasts,  due  to  lower-thanexpected  unit  production  costs  and  stronger-than-expected  property contributions.  While  we  like  the  stock’s  growth  prospects  and  solid management,  its  valuations  remain  uninviting  at  this  juncture.  We maintain our NEUTRAL call, with a SOP-based FV of MYR11.20.

• Above.  Genting Plantations (GP)’s  FY13 core net profit was  above  our and consensus  expectations, coming  in  at  140-145%  of  the  respective FY13  forecasts.  The  main  variance  was  the  lower-than-expected  unit production cost in 4Q13 of MYR1,054/tonne (down 11% q-o-q), strongerthan-expected property contributions,  as well as  a  lower-than-expected overall effective tax rate of 15% in FY13 (versus our 23% projection). GP recorded  an  exceptional  loss of  MYR22.3m  in  4Q13  due to  unrealised losses on its USD-denominated debt.
• Core net profit rose 10%  y-o-y  in  FY13  while turnover grew  12%. The net  profit  increase  was  due  to  improvements  in  its  property  division (EBIT  +148%),  higher  FFB  production  (+10%)  and  lower  effective  tax rates, offset by  a  15% drop  in CPO average selling price (ASP), a 14% decline in palm kernel (PK) ASP and a 6% y-o-y rise in production cost.
• Briefing  highlights:  i)  GP  expects  FY14  fresh  fruit  bunches  (FFB)production to grow 10-12% y-o-y  (flat growth in Malaysia and  a doubling of  production  in  Indonesia),  which  is  slightly  lower  than  our  15% projection;  ii) GP expects  FY14 costs to be lower  by 10-15% y-o-y, as it has  locked  in  70%  of  its  fertiliser  requirements  for  Malaysia  at  prices which are 23% lower y-o-y;  iii)  new planting of 5,800ha done in FY13, targeting  6,000ha  for  FY14;  and  iv)  the  company’s  unbilled  property sales currently  total  MYR75m,  and  it  expects to record  new  sales of c. MYR200m for FY14.
• Maintain  NEUTRAL.  We  tweak  our  FY14  forecast  2.4%  higher  and introduce our FY15 forecasts.  Post earnings revision, we raise our SOPbased FV slightly to RM11.20 (from RM11.00), based on an unchanged 18x  CY14  target  P/E  for  the  plantation  division  and  the  RNAV  of  its property  development  landbank.  While  we  like  the  stock’s  growth prospects and solid management, its  valuations remain uninviting at this juncture. We maintain our NEUTRAL recommendation on the stock.

Financial Exhibits

SWOT Analysis

Company Profile
Genting Plantations is a 53.6%-owned subsidiary of the Genting group. It has 261,000 ha of plantation landbank, of which close to 200,000ha  is  in  Indonesia.  It  also  has  property  development  projects  in  Johor,  Melaka  and  Kedah.  The  group  has  also  invested significantly in biotechnology via the use of genomics to raise productivity and sustainability.

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Source: RHB