KUCHING: Genting Plantations Bhd (Genting Plantations) is expected to see a fresh fruit bunch (FFB) production growth for the financial years 2012 (FY12) and FY13 as well as expand its planted landbank moving forward.
Optimistic about the planter’s growth and expansion prospects, ECM Libra Capital Sdn Bhd (ECM Libra) remarked, “We expect Genting Plantations’ FFB production in FY12 and FY13 to grow by eight per cent and 13 per cent respectively, fuelled by more mature hectarage coming in from their Indonesian plantations.
“We estimate that 11,000 hectares (ha) to 12,000ha will be coming into maturity in FY12 and FY13. This is based on its plantings in previous years.
“We estimate that Genting Plantations is capable of planting 10,000ha to 15,000ha annually, and we forecast new plantings of 12,000ha annually.
“This is possible as we estimate Genting Plantations’ unplanted land to be 75,000ha, predominantly in Indonesia,” ECM Libra stated.
The research team estimated Genting Plantations to currently have about 165,000ha in total land, not including the planned acquisition of 74,390ha in Kalimantan. It estimated that some 71,500ha was unplanted, the majority of which is located in Indonesia.
Assuming new plantings of 12,000ha annually, and that 70 per cent of unplanted land might be utilised, the company could plant land continuously for four years, as long as conditions permitted.
The planter indicated that it did not currently have any plans to venture into downstream activities, even with a large portion of their landbank located in Indonesia.
ECM Libra viewed this fairly positively, as it allowed the planter to concentrate on its key upstream segment.
Furthermore, the Indonesian plantations had only just started producing FFB in FY10, and it might still be a while yet before they could produce enough crude palm oil (CPO) to feed into a refinery.
The research house revised downwards its FY13 earnings per share forecast by 16 per cent mainly as it had changed CPO price assumption from RM3,000 per metric tonne (mt) to RM2,800 per mt, representing a seven per cent price drop.
Meanwhile, ECM Libra also increased its FY13 FFB production forecast to 1.59 million mt from 1.54 million mt, a boost of three per cent. For the same year, the planter was forecasted to draw a net profit of RM410 million from a top line of RM1.19 billion.
The key risks to the forecasted valuations included a significant change in CPO prices and delays in new plantings due to unforeseen events, ECM Libra noted.
It revised Genting Plantations’ target price from RM8.64 per share to RM8.78 per share, implying a 2012 price earnings of 14.5 times, price to book value of 1.8 times and a dividend yield of 1.4 per cent.