30/11/2012 (Borneo Post) - Genting Plantations Bhd’s (Genting Plantations) earnings is expected to rebound going forward as the group sets its sight on stronger demand from the festive seasons, higher crude palm oil (CPO) prices from substitution effect of palm oil and soybean oil as well as the potential realisation of it upcoming properties.

The research arm of MIDF Amanah Investment Bank Bhd (MIDF Research) noted in a recent research that Genting Plantations posted a net profit of RM91.4 million in the third quarter of the financial year 2012 (3QFY12), which was within the research firm and the consensus’ forecasts.

“On a sequential basis, earnings in 3QFY12 was up by 30.9 per cent. However, the cumulative earnings for the first nine months in the financial year 2012 (9MFY12) earnings declined by 31 per cent year-on-year to RM240 million,” it said.

Consequently, the research firm attributed the decrease in earnings to the group’s declined profit from the plantation segment which went down by 32.5 per cent year-on-year and remained depressed due to lower average selling price realised, higher labour cost and unfavourable market demand as a result of global economic slowdown.

However, despite lingering woes in the plantation segment, MIDF Research opined that the festive seasons would bring in stronger demand for the group while higher CPO prices that occured from the substitution effect due to the wide spread discount of palm oil to soybean would further boost Genting Plantation’s future earnings.

In addition, the research firm expected the group’s future would remain intact, anchored by its growing property segment.

“Following the completion of Genting Plantations’ latest joint venture in Kalimantan Tengah, the group’s total land bank has increased by 38 per cent to 228,000 hectare to 165,000 hectare.

“Hence, we are expecting fresh fruit bunch (FFB) and CPO production to increase by a circa five per cent in the next financial year,” it opined.

Meanwhile, MIDF Research highlighted the group’s property segment which grew more than 100 per cent year-on-year in 3QFY12 and 9MFY12, contributed by a sustained demand for property.

It added, “We are expecting Genting Plantations to capture the growing interest in Iskandar Malaysia and gain higher profit from its property offerings in Kulijaya and Batu Pahat.”

Additionally, the research firm anticipated positive prospects from the property segment which would potentially help boost the group’s bottom line going forward.

Taking on a positive stance on the group’s potential upside growth, the research firm went on to peg a target price of RM9.88 per share, derived from 16 times earnings per share 2013.