Maybank Investment Bank (Maybank IB) upgrades Genting Plantations (GENP) to BUY (from HOLD) as recent share price weakness represents a buying opportunity with 17% total return upside to the TP of MYR6.08 on unchanged 19x FY23 PER, its -1SD of 8Y mean.
On a longer term, its R&D arm, which Maybank IB visited recently is on the right track to provide a sustainable future with its enhanced seed yields and agro management solutions.
GENP now trades at an (unadjusted) EV/ planted ha of just MYR42,000, making it attractively priced relative to other large caps.
Granted seed production license in 2019 Last week, Maybank IB had the opportunity to visit GENP’s R&D facility at its Genting Sepang Estate (measuring ~1,067 acres), located right next to the Sepang F1 Circuit.
This area, though prime for property development, houses the important R&D work of the group that will define and shape GENP’s long term future. Despite embarking in genome sequencing on oil palm since 2006, the bank understands GENP only received its seed production license from MPOB in 2019 (due to MPOB’s stringent requirements of showing at least 7 years of data collection and records).
Researching for a promising future GENP targets to make available its high yielding GT-9 genomics seeds to the market next year once it ramps up the seed production capacity to 5m tpa (from 1m tpa currently).
GT-9 has the potential to deliver over 30t of FFB/ha when it hits prime maturity (GENP’s average FFB yield between 2018-2022: 17.7t/ha).
Besides oil palm seedlings, GENP’s R&D team is also keen to study and expand into other cash crops such as maize, paddy, melon, and vegetables in addressing national food security. FY23E: Well on track to deliver +5% YoY FFB growth.
Operationally, GENP is showing clear signs of steady output recovery.
The group’s Aug 2023’s output hit a 33-month high at 0.19mt to bring 8M FFB output to 1.34mt (+5.3% YoY; 1H23: +2.6% YoY); on track to meet GENP’s growth guidance of 5% YoY for FY23E (MIBG Research: +5% YoY). Maybank IB make no changes to their earnings forecasts.
A tactical upgrade to BUY (from HOLD).
