Genting Plantations’ expansion plans in Indonesia viewed positively


KUCHING: Genting Plantations Bhd’s (Genting Plantations), via its 73.7 per cent subsidiary, Palmindo Holdings Pte Ltd, plans to expand its landbank in Indonesia has garnered positive views from analysts.

According to the research arm of Hong Leong Investment Bank Bhd (HLIB Research), the proposed acquisitions would increase Genting Plantations’ total plantation landbank (in both Malaysia and Indonesia) by 21,995 hectare (or 9.2 per cent) to 260,371 hectare.

“Out of the 21,995 hectare of land bank Genting Plantations proposed to acquire, 3127 hectare of the landbank has already been planted with oil palm (and recorded fresh fruit bunches yield of 5.9 metric tonnes per hectare in 2015),” it pointed out.

To note, the proposed acquisition agreement included a 100 per cent stake in CAA, which in turn, though its 95 per cent owned subsidiary, PT Agro Abadi Cemerlang (AAC), holds the rights to develop approximately 8,095 hectare of land in Kabupaten Sanngau, West Kalimantan (Indonesia) into oil palm plantation for US$34.55 million and a 100 per cent stake in PCI.

This in turn, through its 95 per cent subsidiary, PT Palma Agro Lestari Jaya (PALJ), holds the rights to develop approximately 13,900 hectare of land in Kabupaten Sintang, West Kalimantan (Indonesia) into oil palm plantation for US$7.6 million.

“Assuming the planted landbank is valued at US$7,000 per hectare,  which indicates that Genting Plantations is paying circa US$1,042 per hectare.

“We believe the price tag is fair, given the close proximity between AAC and PALJ’s land to Genting Plantations’ other landbank in West Kalimantan.

“Besides, it will expedite Genting Plantations’ upstream expansion in Indonesia, as 3,127 hectare have already been planted, hence raising Genting Plantations’ total planted area by 4.6 per cent to 70,829 hectare,” HLIB Research said.

Overall, the research team said, “While we like Genting Plantations for its decent FFB output growth, strong balance sheet, as well as its initiatives in expending into the downstream segment, we believe near-term upside is capped by its relatively pricey valuations.”

It pegged a ‘hold’ recommendation on the stock.