GENP (2291) - Genting Plantations - Becoming more integrated
Target RM10.80 (Stock Rating: HOLD)
Genting Plantations and Musim Mas Group are collaborating to build a 600k tonne refinery in Sabah. The project (cost of building the refinery and working capital) will require an investment of RM300m, and allow Genting Plantation to raise the value-add of its palm products and become a more integrated palm oil player. We estimate that its mills in Sabah will be able to supply up to 43% of the raw materials needed for the refinery which, in turn, can supply raw materials to the group’s biorefinery factory and biodiesel plant. However, this project would not be earnings-accretive in the near-term. We are keeping to our forecasts, Hold rating and SOP-based target price.
What Happened
Genting Plantations and Musim Mas Group are teaming up to set up a palm oil refinery in the Palm Oil Industrial Cluster (POIC) in Lahad Datu, Sabah. Genting Plantations will take a 72% interest in the joint venture company Alfa Raya Development and Musim Mas, the remaining 28%. The refinery project, which entails an investment of about RM300m, will have a capacity of 600,000 tonnes per annum (1,800 tonnes per day). It is targeted for completion in the second half of 2016. The palm oil refinery will be part of the larger Genting Integrated Biorefinery Complex that it is setting up for the production of high value-added downstream products.
What We Think
The project does not come as a total surprise as the group had indicated to us its ambition to move downstream to raise the value-add of its palm oil produced. It currently owns two biodiesel plants in Sabah and recently entered into a JV with Elevance Renewable Sciences, a specialty chemicals company, to build a 240,000 tonne biorefinery in Lahad Datu, Sabah. The proposed refinery will be able to process CPO from the group’s mills and estates, and the refined products will be partly sold to the group’s biorefinery when it comes on-stream in 3Q17 and biodiesel plant. Genting Plants’ mills in Sabah produce around 260,000 tonnes of CPO per annum and will be able to supply around 43% of the feedstock for its refinery. Having Musim Mas, a major palm oil player in Indonesia, as a partner will enable Genting Plants to tap into the group’s experience in the marketing and processing of refined palm oil products.
What You Should Do
We are positive on the group’s initiatives to be more integrated as well as plans to raise the value-add of its products, but do not expect this to significantly impact earnings as the refinery will only be ready in 2H16 and may take time to be profitable. As such, we are keeping to our earnings forecasts and Hold call.
Source: CIMB Daybreak - 09 March 2015
Target RM10.80 (Stock Rating: HOLD)
Genting Plantations and Musim Mas Group are collaborating to build a 600k tonne refinery in Sabah. The project (cost of building the refinery and working capital) will require an investment of RM300m, and allow Genting Plantation to raise the value-add of its palm products and become a more integrated palm oil player. We estimate that its mills in Sabah will be able to supply up to 43% of the raw materials needed for the refinery which, in turn, can supply raw materials to the group’s biorefinery factory and biodiesel plant. However, this project would not be earnings-accretive in the near-term. We are keeping to our forecasts, Hold rating and SOP-based target price.
What Happened
Genting Plantations and Musim Mas Group are teaming up to set up a palm oil refinery in the Palm Oil Industrial Cluster (POIC) in Lahad Datu, Sabah. Genting Plantations will take a 72% interest in the joint venture company Alfa Raya Development and Musim Mas, the remaining 28%. The refinery project, which entails an investment of about RM300m, will have a capacity of 600,000 tonnes per annum (1,800 tonnes per day). It is targeted for completion in the second half of 2016. The palm oil refinery will be part of the larger Genting Integrated Biorefinery Complex that it is setting up for the production of high value-added downstream products.
What We Think
The project does not come as a total surprise as the group had indicated to us its ambition to move downstream to raise the value-add of its palm oil produced. It currently owns two biodiesel plants in Sabah and recently entered into a JV with Elevance Renewable Sciences, a specialty chemicals company, to build a 240,000 tonne biorefinery in Lahad Datu, Sabah. The proposed refinery will be able to process CPO from the group’s mills and estates, and the refined products will be partly sold to the group’s biorefinery when it comes on-stream in 3Q17 and biodiesel plant. Genting Plants’ mills in Sabah produce around 260,000 tonnes of CPO per annum and will be able to supply around 43% of the feedstock for its refinery. Having Musim Mas, a major palm oil player in Indonesia, as a partner will enable Genting Plants to tap into the group’s experience in the marketing and processing of refined palm oil products.
What You Should Do
We are positive on the group’s initiatives to be more integrated as well as plans to raise the value-add of its products, but do not expect this to significantly impact earnings as the refinery will only be ready in 2H16 and may take time to be profitable. As such, we are keeping to our earnings forecasts and Hold call.
Source: CIMB Daybreak - 09 March 2015
