GP’s  9M14 earnings were in line, with  continued strength seen from its Indonesian plantations.  Maintain BUY  and  SOP-based  TP of  MYR11.60 (11% upside), as we believe GP’s  strong FFB production growth would help  offset  the  lower  CPO  prices  somewhat.  We  also  highlight  that stripping  out  the  RNAV  of  the  company’s  property  landbank  from  its current market capitalisation would bring its P/E down by 5-6x.

In  line.  Genting  Plantations‟  (GP)  9M14  core  net  profit  was  within  ourand consensus estimates, ie 73-76% of FY14 forecasts.

GP’s  9M14  core net profit grew  18% YoY,  while  its  turnover  rose 9%. The net profit increase was due to a 6% YoY  rise in CPO average  price, a 46% rise in palm kernel (PK) average price and a 12% rise in fresh fruit bunches  (FFB)  production,  as  well  as  an  estimated  4%  YoY  fall  in production  cost.  In  addition,  GP  recorded  some  industrial  and commercial property land sales during the period, which resulted in a 3% YoY increase in property contributions. 

Briefing highlights:  i)  GP  maintains its  FY14 FFB projection  growth  of 10-12% YoY, which is in line with our projected 12% for FY14. For FY15, GP expects FFB producion to grow  about 13%, in line with our 13.7% projection,  ii)  its  9M14  production  cost  was  down  4%  YoY  to MYR1,370/tonne.  GP  expects  costs  to  rise  in  FY15  due  to  lower  PK credit and higher fertiliser prices, iii ) GP  continues to target new planting of 3,500ha in FY14 and 6,000ha in FY15, in line with our expectations, and  iv)  its  unbilled  property  sales  currently  total  MYR62m,  while  it expects  to  record  some  MYR142m  worth  of industrial  lot  land  sales  in 4Q14. 

No changes  to our forecasts.  We highlight that every MYR100/tonne change in CPO price could impact the company‟s net profit by 5-7% per annum. 

Maintain  BUY. We maintain  our SOP-based TP of  MYR11.60 based  on an unchanged 18x CY15 target P/E for the plantation division and RNAV of  property  development  landbank.  Maintain  BUY,  as  we  believe  GP‟sstrong  FFB  production  growth  would  help  offset  the  lower  CPO  prices somewhat.  We  also  highlight  that  stripping  out  the  RNAV  of  the company‟s property landbank from its current market capitalisation would bring its P/E down by 5-6x.

Source: RHB