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Genting Plantation

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Genting Plantation Empty Genting Plantation

Post by mabs Fri 02 Mar 2012, 10:43

Investment Highlight

- Expansion in Indonesia. As at December 2010, Genting Plantation is having 29,413 hectare planted area in Indonesia which represents 66% increase compared to 2009. Planted area in Indonesia has started to contribute to revenue since 2010. We expect revenue will be strongly boosted in FY2013/14.

- Small contributions from Johor Premium Outlet (JPO). JPO, the joint venture of Genting Plantation and Premium Outlets. is being launched in Dec 2011. We expect earnings contribution from JPO to between 1%-2% p.a. in FY12 net profit. We understand second JPO is in the pipeline to be established in the near future. We expect total earning contribution from JPO to between 5%-8% p.a. by then.

- Commendable margin. PBT margin of Genting Plantation has been consistently above 40%, outperforming its peers’ of 30%. We believe Genting Plantation could sustain the high PBT margin in years to come mainly attributable to effective cost management.

- Low dividend payout. Genting Plantation has maintained dividend payout ratio of less than 20% in past years which is significantly lower than its peer which is above 45%. This does not bode well for the company to attract interests from the yield-seeking investors.

- Rich valuation. The stock price has gone 8.02% ytd. Share price is currently trades at 17x FY12F PE which is above its mean of 15x.

- SELL with target price of RM8.14
based on 15x FY12F PE, which is at its mean.
mabs
mabs
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