GENP (2291) - Genting Plantations - 4Q boosted by land sale
Target RM10.80 (Stock Rating: HOLD)
Genting Plantations’ FY14 core net profit was above expectations, accounting for 111% of our full-year forecast and 115% of consensus. The better results were due mainly to the RM85m gain achieved from the sale of industrial land in Johor in 4Q. FY14 core net profit jumped 30% yoy due mainly to higher plantation and property earnings. A final and special dividend of 7 sen was declared, bringing full-year dividends to 10 sen. This is in line with our expectation. We fine-tune our FY15-16 EPS forecasts by 1% but maintain our SOP-based target price of RM10.80. The stock remains a Hold, as we think the market has already priced in the group’s growth prospects in Indonesia.
Key results highlights
The group’s 4Q14 core net profit rose 18% yoy due mainly to higher property contribution and a lower effective tax rate of 22%. Property net profit jumped 231% yoy in 4Q14 due to a gain of RM85m from the sale of 164 acres industrial land in Johor for RM143m. The lower effective tax rate was due to the utilisation of tax incentives. Plantation earnings fell 23% yoy to RM119m in 4Q due to lower selling prices achieved for its palm products. Its Indonesian estates posted its best quarterly profit achievement, thanks to stronger production. Biotech’s losses were lower qoq at RM7m, as it posted maiden revenue from the screening of planting materials.
Key takeaways from teleconference
The group indicated that 1Q15 production is likely to be weaker due to lower FFB yields achieved at its Malaysian estates. The group revealed that the lower-than-expected yields could be due to the dry weather experienced a year ago. We gathered that the group’s 1Q15 FFB output could decline by 5% yoy. However, Genting Plantations is hopeful that FFB yields will recover in the later part of the year and stuck to its FFB output growth guidance of 10-12% in FY15. It guided for new plantings plan of around 6,000 ha in FY15 and indicated that its overall cost of production for its Malaysian estates in FY14 was RM1,178 per tonne, which is slightly lower than its guidance of RM1,200 per tonne.
Project weaker earnings in FY15
We project lower earnings in 2015 due to the absence of the RM85m gain from the industrial land sale. The group indicated that it is exploring other potential land sales but the gain is unlikely to be as large as those achieved in FY14.
Source: CIMB Daybreak - 26 February 2015
Target RM10.80 (Stock Rating: HOLD)
Genting Plantations’ FY14 core net profit was above expectations, accounting for 111% of our full-year forecast and 115% of consensus. The better results were due mainly to the RM85m gain achieved from the sale of industrial land in Johor in 4Q. FY14 core net profit jumped 30% yoy due mainly to higher plantation and property earnings. A final and special dividend of 7 sen was declared, bringing full-year dividends to 10 sen. This is in line with our expectation. We fine-tune our FY15-16 EPS forecasts by 1% but maintain our SOP-based target price of RM10.80. The stock remains a Hold, as we think the market has already priced in the group’s growth prospects in Indonesia.
Key results highlights
The group’s 4Q14 core net profit rose 18% yoy due mainly to higher property contribution and a lower effective tax rate of 22%. Property net profit jumped 231% yoy in 4Q14 due to a gain of RM85m from the sale of 164 acres industrial land in Johor for RM143m. The lower effective tax rate was due to the utilisation of tax incentives. Plantation earnings fell 23% yoy to RM119m in 4Q due to lower selling prices achieved for its palm products. Its Indonesian estates posted its best quarterly profit achievement, thanks to stronger production. Biotech’s losses were lower qoq at RM7m, as it posted maiden revenue from the screening of planting materials.
Key takeaways from teleconference
The group indicated that 1Q15 production is likely to be weaker due to lower FFB yields achieved at its Malaysian estates. The group revealed that the lower-than-expected yields could be due to the dry weather experienced a year ago. We gathered that the group’s 1Q15 FFB output could decline by 5% yoy. However, Genting Plantations is hopeful that FFB yields will recover in the later part of the year and stuck to its FFB output growth guidance of 10-12% in FY15. It guided for new plantings plan of around 6,000 ha in FY15 and indicated that its overall cost of production for its Malaysian estates in FY14 was RM1,178 per tonne, which is slightly lower than its guidance of RM1,200 per tonne.
Project weaker earnings in FY15
We project lower earnings in 2015 due to the absence of the RM85m gain from the industrial land sale. The group indicated that it is exploring other potential land sales but the gain is unlikely to be as large as those achieved in FY14.
Source: CIMB Daybreak - 26 February 2015
