Plantation Industries and Commodities Minister Datuk Seri Mah Siew Keong said the increase was due to the higher palm oil price, despite the volume of export being almost the same.
KUALA LUMPUR: Kenaga Research has maintained its "market perform" call on Genting Plantations Bhd
with lower target price of RM11 on news that the company is acquiring a tract of plantation land for US$95mil.
Genting Plantations Bhd announced that its indirect subsidiary AsianIndo Holdings Pte Ltd is acquiring an 85% stake in PT Kharisma INti Usaha, which owns the land use rights for 14,700 hectares of plantation land in Kalimantan Selatan.
The acquisition is targeted for completion in fourth quarter 2017.
"The move does not come as a surprise as management has previously noted its willingness to acquire well-priced land bank. Valuations wise, we find the pricing as lower than average,
with cost/ha of US$7,400 lower than the average Indonesian planted area cost of RM40,000/ha.
"Note that the purchase price includes loans of US$71.6mil, which will be assumed by Genting Plantations post-acquisition. On the earnings side, after accounting for additional interest cost and minority interest, we expect the acquisition to be earnings neutral but positive in the long-run, as 2016 FFB yield of 8.2 metric tons (MT)/ha indicates young average age, which should improve in the next 2-3 years," Kenanga Research said in its report.
FOr the plantations segment, the research house expects stronger upstream performance on production recovery to be offset by lacklustre dowstream distribution due to limited biodiesel demand and tough refining margins.
For the property side, property demand in Johor remains soft although Premium OUtlet earnings should be offset by higher contributios from the new Genting Premium Outlets which began operations in mid-Q2FY17.
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