Monday, 16 April 2012

CIMB Research upgrades Genting Plantations to Neutral, raises TP to RM9.35

KUALA LUMPUR (April 16) CIMB Research has upgraded Genting PLANTATION []s Bhd from Underperform to Neutral with a revised target price of RM9.35 from RM8.53 and said the stronger growth prospects helped offset its concern over the ompany’s rich valuations.

Genting Plantations has entered into an agreement to acquire a 63.2% stake in a joint venture company for US$116 million (RM348 million), a move which will give it access to some 74,390ha of oil palm estates in Indonesia’s central Kalimantan.

“But its effective stake in the Indonesian subsidiaries parked under the JV company will only be 60%. Some 14,150ha of the landbank are planted with oil palms,” CIMB Research said in a note Monday.

The research house said Genting Plantations’ acquisition of 63.2% of a JV company with Indonesian estates is a good move as it will boost its output growth, raised its planted area by 15% and enhance FY13-14 EPS by 1-3%.

“Our SOP-based target price rises as we up the plantation P/E from 12.6x to 14x, in line with the big-cap players.

“We upgrade the stock from Underperform to Neutral as the stronger growth prospects help offset our concern over its rich valuations. We continue to prefer Sime Darby,” it said.

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