GENP (2291) : Genting Plantations - Stronger 4Q earnings in store
Target RM10.80 (Stock Rating: HOLD)
Genting Plantations’s 9M14 core net profit was broadly in line, accounting for 71% of our full-year forecast and 74% of consensus. Core net profit jumped 39% yoy in 9M14 due mainly to higher production and ASPs for its palm products. As expected, no dividend was declared. We expect stronger 4Q14 earnings to be driven by higher production and stronger property contributions. We maintain our earnings forecasts and SOP-based target price of RM10.80. The stock remains a Hold as we feel that the market has already priced in the group’s growth prospects.
Key results highlights
The group’s 3Q14 core net profit rose 25% yoy due to higher plantation and property earnings However, core net profit fell 12% qoq due to a higher effective tax rate of 34%. The higher tax rate was due partly to losses from its biotech division. Plantation earnings jumped 15% yoy to RM100m due to higher production (+12%) and lower costs of production. Its Indonesian estates posted a profit of RM3.4m in 3Q14 (3% of its plantation earnings). Property posted better earnings, thanks to higher sales. Biotech’s losses rose 67% yoy to RM10m, while associates posted higher earnings due to better contributions from Johor Premium Outlet (JPO), following the completion of Phase 2.
Key takeaways from teleconference
The group expects its 4Q production to be stronger, driven by improved yields from its Sabah estates and larger new mature area in Indonesia. We gathered that Nov production is currently stronger than the same period in Oct. Overall, it stuck to its guidance of around 10% output growth in FY14 and 13% for FY15. However, it lowered its guidance of new planting plan to around 3,500ha from 4,500ha. The group indicated that its overall cost of production for 9M14 was RM1,370 per tonne, which is lower compared to 9M13’s RM1,436 per tonne. Sales from its property projects in Johor remain robust and it could book a gain from industrial land sales in 4Q. The group sold around 165 acres of industrial land for RM142m recently and unrecognised progress billings stood at RM62m as at end-Sep.
Project stronger earnings in 4Q
We project stronger earnings in 4Q, driven by higher production from its Sabah and Indonesian estates, stronger CPO prices and better property earnings.
Source: CIMB Daybreak - 21 November 2014
Target RM10.80 (Stock Rating: HOLD)
Genting Plantations’s 9M14 core net profit was broadly in line, accounting for 71% of our full-year forecast and 74% of consensus. Core net profit jumped 39% yoy in 9M14 due mainly to higher production and ASPs for its palm products. As expected, no dividend was declared. We expect stronger 4Q14 earnings to be driven by higher production and stronger property contributions. We maintain our earnings forecasts and SOP-based target price of RM10.80. The stock remains a Hold as we feel that the market has already priced in the group’s growth prospects.
Key results highlights
The group’s 3Q14 core net profit rose 25% yoy due to higher plantation and property earnings However, core net profit fell 12% qoq due to a higher effective tax rate of 34%. The higher tax rate was due partly to losses from its biotech division. Plantation earnings jumped 15% yoy to RM100m due to higher production (+12%) and lower costs of production. Its Indonesian estates posted a profit of RM3.4m in 3Q14 (3% of its plantation earnings). Property posted better earnings, thanks to higher sales. Biotech’s losses rose 67% yoy to RM10m, while associates posted higher earnings due to better contributions from Johor Premium Outlet (JPO), following the completion of Phase 2.
Key takeaways from teleconference
The group expects its 4Q production to be stronger, driven by improved yields from its Sabah estates and larger new mature area in Indonesia. We gathered that Nov production is currently stronger than the same period in Oct. Overall, it stuck to its guidance of around 10% output growth in FY14 and 13% for FY15. However, it lowered its guidance of new planting plan to around 3,500ha from 4,500ha. The group indicated that its overall cost of production for 9M14 was RM1,370 per tonne, which is lower compared to 9M13’s RM1,436 per tonne. Sales from its property projects in Johor remain robust and it could book a gain from industrial land sales in 4Q. The group sold around 165 acres of industrial land for RM142m recently and unrecognised progress billings stood at RM62m as at end-Sep.
Project stronger earnings in 4Q
We project stronger earnings in 4Q, driven by higher production from its Sabah and Indonesian estates, stronger CPO prices and better property earnings.
Source: CIMB Daybreak - 21 November 2014
