Genting Plantations is proposing to acquire two pieces of leasehold land in Segambut from Genting Malaysia for MYR65.76m. No change to our BUY call and MYR10.40 TP (1% upside) for now, as we are in the midst of reviewing our earnings forecasts and recommendation. Despite seeming relatively inexpensive, we believe the pricing of MYR173 psf is fair given the 59-year tenure left on its leasehold title.

Proposes to buy land from Genting Malaysia. Genting Plantations (GP) has entered into a sale and purchase (S&P) agreement to buy twoparcels of adjoining leasehold land measuring 380,902 sq ft in Segambut from Genting Malaysia (GENM MK, NEUTRAL, TP: MYR3.96) for MYR65.76m. The land has a 99-year lease, with an unexpired leasehold interest of 59 years. There are several buildings erected on the land including a single-storey office building, a store, a workshop and a parking yard. The buildings are 35-40 years old and have a net book value of MYR7.9m. On completion date, a new tenancy agreement will be executed, where the vendor and the purchaser as the landlord willexecute a tenancy agreement for 2+1 years, with annual rental of MYR325,000. GP intends to pay for this acquisition entirely with cash and targets to complete it by 1Q16.

Price psf reasonable. GP is paying MYR173 psf for the land, which may seem relatively inexpensive compared with the market rate of MYR300-400 psf. However, given the short leasehold land tenure of 59 years, we believe it is fair. The market value of the properties has been valued at MYR68.5m by independent valuers. GP intends to use the land for property development, although no plans or timeline has been given.

Maintain BUY. With this acquisition, GP’s net gearing will rise to a small 1.7% (from negligible previously). It is possible that GP could use part of its proceeds from its recently-raised sukuk murabahah of MYR1bn for this acquisition. We expect interest income foregon e to reduce net profit by <1% pa, although the development of the landbank could be positive in the longer term. As we are in the midst of reviewing our earningsforecasts and TP for GP, we maintain our BUY call with an unchanged SOP-based TP of MYR10.40 for now.