PETALING JAYA: Genting Plantations Bhd
’s proposed venture into the vegetable-seeds business by partnering with a China firm is expected to have limited impact on near-term profits, owing to likely high upfront costs.
Research houses such as BIMB Research and CIMB Research are “neutral” on the venture.
“We expect contributions to come no earlier than financial year 2027 (FY27) as operations scale up,” BIMB Research said.
Meanwhile, CIMB Research said: “We believe the project is unlikely to be earnings-accretive in the near term given the high upfront capital expenditure required for technology acquisition and seed-breeding or research and developmentfacilities.”
It pointed out that Genting Plantations’ 60% share of the potential investment in the joint-venture (JV) is about RM315mil.
Genting Plantations, via its indirect wholly owned unit ACGT Vegetable AgVentures (AVA), is planning a JV with Shouguang Vegetable Science & Technology (SVST), a Malaysian subsidiary of China’s Shandong Shouguang Vegetable Industry Group (CSV).
The JV will develop 70 acres of land in Kulai, Johor, into a centre of excellence for tropical vegetable crops.
Two JV companies will be formed, one to spearhead seed breeding and technology transfer, and another to manage greenhouses, production, processing and trading.
AVA will hold 60% in both entities, while SVST holds 40%. The completion is targeted by the first quarter of next year.
In total, the capital commitment is about RM525mil by both parties.
BIMB Research described the capital commitment as “sizeable” and therefore, execution risks exist.
“But Genting Plantations’ majority 60% stake and CSV’s expertise and proven track record could mitigate downside,” the research house added.
It also sees the JV as a strategic diversification beyond palm oil, strengthening Genting Plantations’ environmental, social and governance credentials and aligning with Malaysia’s food-security goals.
“Partnering CSV accelerates Genting Plantations’ entry into high-value vegetable seeds and crops, a segment with growing domestic and export potential,” it added.
CIMB Research noted that proceeds from Genting Plantations’ recent disposal of agricultural land in Melaka to Scientex Bhd for RM333.8mil should be sufficient to fund the investment.
Should the full amount be debt-funded, BIMB Research estimated that Genting Plantations’ gearing would rise to about 0.34 times.
This is still within comfortable levels and broadly in line with the plantation sector’s average of around 0.4 times.
“We do not expect this JV to constrain Genting Plantations’ dividend or capital expenditure plans for plantations.”
BIMB Research has a “buy” call on the stock, with a target price of RM6 a share.
CIMB Research kept its “hold” call with a target price of RM5.28.
