KUALA LUMPUR (Feb 29): Shares in Genting Plantations Bhd dropped in early trade on Thursday, as analysts maintained caution following weaker-than-expected earnings for the fourth quarter ended Dec 31, 2023 (4QFY2023). 

At 10.54am, the stock was six sen or 0.97% lower at RM6.10, giving it a market capitalisation of RM5.47 billion. In contrast, the Bursa Malaysia Plantation Index that tracks 40 stocks in the sector was 0.5% higher, while the benchmark index FBM KLCI was up 0.1%.

At least one analyst covering Genting Plantations has downgraded their rating, citing less attractive valuations following the recent share price run-up. 

Hong Leong Investment Bank, which downgraded the stock to ‘hold’, with a target price (TP) of RM6.45, said fresh fruit bunch (FFB) growth in Genting Plantations' Malaysian estates will likely remain muted, with another 3,000 hectares of land bank earmarked for replanting.  

Nevertheless, the company’s FFB output guidance of 5% for FY2024 is set to be supported by the young age profile of its Indonesian estates, which contributed 70% of total production in FY2023. 

Genting Plantations has climbed more than 7% so far this year on Bursa Malaysia.

A majority of nine out of 15 analysts still have 'hold' calls on the stock, followed by five 'buy' recommendations, and one 'sell'. The median 12-month TP is RM6.32, according to Bloomberg, implying a potential gain of 3.3% from the current level. 

Maybank Investment Bank in its latest research note kept its 'hold' recommendation, while urging investors to watch out for asset disposals that would unlock the value of strategic estates faster.

On Wednesday, Genting Plantations reported a 13% increase in net profit to RM63.19 million or 7.04 sen per share for 4QFY2023, as quarterly revenue rose slightly by 1.2% to RM800.46 million from RM791.19 million a year earlier.

However, net profit for FY2023 plunged 46% to reach only RM253.49 million, against RM471.42 million for FY2022. Full-year revenue also fell by 7% to RM2.97 billion from RM3.19 billion.  

The group attributed the lower earnings to a weak palm oil market, which was affected by sluggish demand, high inventory levels, and geopolitical tensions. 

Despite the below-consensus results, some analysts maintained their positive outlook for Genting Plantations, citing strong FFB growth prospects, lower cost of production, and more normalised tax rates. 

CGS International kept its ‘add’ call on the stock, with a TP of RM6.62, betting on lower cost of production, as well as average crude palm oil prices hovering around RM3,500 per metric ton.

“Potential catalysts are a recovery in profit over the next few quarters, driven by the plantation and property segments, and an increase in dividend payout,” the research house added.

Read also:
Genting Plantations pays 13 sen dividend after 4Q profit rises 13%