In 1977, the late Tan Sri Dato’ Seri Lim Goh Tong has incorporated Asiatic Development Bhd. It commenced plantation activities with 13,700 hectares of estates in West Malaysia in 1980. Subsequently, in 1982, it was listed on Bursa Malaysia. In 2009, the listing name was officially changed to Genting Plantations Bhd, a name that is retained till today.
Since its listing, Genting Plantations Bhd has expanded its plantation assets to East Malaysia and Indonesia. 35 years later, Genting Plantations Bhd has become the third largest palm oil corporation listed on Bursa Malaysia in terms of market capitalization behind IOI Corporation Bhd and Kuala Lumpur Kepong Bhd currently.
In this article, I’ll cover 8 things you need to know about Genting Plantations Bhd before you invest.
#1: Stock Symbol
Ticker Symbol: KLSE: GENP / KLSE: 2291
Market Capitalization: RM 8.19 Billion (2 October 2017)
Share Price: RM 10.30 (2 October 2017)
Industry: Palm Oil
Syariah Compliant: Yes
#2: The Business
Genting Plantations Bhd has established an integrated business model that includes:
Palm Oil Plantations
Genting Plantations Bhd has maintained its portfolio size of its palm oil estates in Malaysia at 59,000 – 60,000 hectares. From which, these estates has consistently produced 1.1 – 1.4 million MT of fresh fruit bunches (FFB) a year over the last 10 years.
Genting Plantations Bhd had started its planting activities in Indonesia in 2007. Beginning with 1,716 hectares in 2007, Genting Plantations Bhd has enlarged its size of palm oil estates in Indonesia to 131,159 hectares in 2016. These estates had produced its first fruits in 2010. Since then, the amount of FFB production had grown from 1,151 MT in 2010 to 479,334 MT in 2016.
FFB Production in ‘000 Metric Tonnes
Source: Annual Reports of Genting Plantations Bhd
Palm Oil Mills
Genting Plantations Bhd has 10 palm oil mills. 6 mills are located in Sabah. 3 mills are located in Indonesia and the remaining one is in West Malaysia. Combined, these mills have total milling capacity of 490 metric tonnes per hour.
Genting Plantations Bhd is engaged in property development activities through Genting Property Sdn Bhd. It is currently engaged in development projects such as Genting Indahpura at Kulai, Johor and Genting Highlands Premium Outlets. In 2016, the property division has contributed RM 125.6 million in revenues. It remains a small division to Genting Plantations Bhd as it accounted only 8.5% of the company’s group revenues in 2016.
#3: The Financials
Overall, Genting Plantations Bhd has achieved growth in revenues, up from RM 1.23 billion in 2012 to RM 1.48 billion in 2016. This is attributed to the company’s FFB production in Indonesia. During the 5-year period, Genting Plantations Bhd has made around RM 300 million a year in shareholders’ earnings. On average, Genting Plantations Bhd has made return on equity (ROE) of 7.65% over the last 5 years. This means, it has generated RM 7.65 in annual earnings from every RM 100 in shareholders’ equity.
Figures in RM Million
Source: Annual Reports of Genting Plantations Bhd
#4: Growth Plans
Genting Plantations Bhd has revealed 3 major sources for future growth. They include:
Genting Plantations Bhd has a relatively young portfolio of palm oil estates. As at 31 December 2016, it has 38,468 hectares of immature palm oil estates, accounting for 29.3% of its total estates. Most of these estates are situated in Indonesia. As such, these estates would start to produce FFB to Genting Plantations Bhd progressively as these trees mature in the immediate future.
In addition, Genting Plantations Bhd has 112,196 hectares of land bank which are unplanted. It is equivalent of 85.5% of the size of its planted area presently. These unplanted landbank would be vital for Genting Plantations Bhd to sustain growth in FFB production in the long-term.
Genting MusimMas Refinery
In mid-2015, Genting Plantations Bhd has begun the construction of Genting MusimMas Refinery. This refinery is a 72:28 collaboration between Genting Plantations Bhd and Musim Mas Group, one of the leading integrated palm oil producers in the world. Located in Sabah, this refinery has a production capacity of 600,000 MT a year. To-date, the construction of this refinery has been completed and is already in operations starting in January 2017.
Inevitably, Genting Plantations Bhd faces the risk of adverse movements in palm oil prices. This is subjected to a combination of many factors. They include weather, crude oil prices, soybean oil prices, palm oil production and inventory levels. In the 1st half of 2017, Genting Plantations Bhd has reported its average sales prices of CPO and PK to be RM 2,861 and RM 2,513 per tonne respectively.
As I write, Genting Plantations Bhd is trading at RM 10.30 a share. In 2017, Genting Plantations Bhd had recorded RM 0.465 in earnings per share (EPS). Thus, its current P/E Ratio works out to be 22.15. Also, as at 30 June 2017, IOI Properties has reported to have RM 5.37 in net assets a share. Thus, its current P/B Ratio works out to be 1.92.
#7: Investors Relation
For further enquiries on Genting Plantations Bhd’s Investors Relation matters, you may contact:
Telephone: (603) 2178 2288
#8: Major Shareholders
As at 2 March 2017, the substantial shareholders of Genting Plantations Bhd are:
– Genting Bhd: 51.21%
– Employees Provident Fund Board: 13.51%
– Kumpulan Wang Persaraan: 4.60%
– Great Eastern Life Assurance (Malaysia) Bhd (PAR 1): 1.63%
– AIA Bhd: 1.57%
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The information provided is for general information purposes only and is not intended to be any investment or financial advice. All views and opinions articulated in the article were expressed in Ian’s personal capacity. It does not in any way represent those of his employer and other related entities. Ian does not own any companies mentioned.