KUALA LUMPUR: Maybank Investment Bank Bhd (Maybank IB) has a "buy" call on Genting Plantations Bhd for its "under-appreciated" land bank.
The firm said at an (unadjusted) enterprise value (EV)/planted hectare (ha) of just RM41,000, Genting Plantations is attractively priced considering the value of its 16,908 ha of strategic freehold land and other assets.
Genting Plantations trades at 0.33 times of Maybank IB's revised net asset value (RNAV) estimate of RM15.88 a share.
Maybank IB said its immense RNAV offers downside support while its valuable landbank offers good inflationary hedge over the long run.
Genting Plantations is one of the largest freehold land owner in Peninsular Malaysia with 16,908 hectares, with 61 per cent located in Johor, 18 per cent in Malacca and Negeri Sembilan, 18 per cent in Kedah and Perak, and three per cent in Selangor.
"As these lands were amassed progressively since 1981, and strategically located on highly populated areas of the west coast of peninsular Malaysia, we estimate these freehold land to be worth RM7.25 billion or 1.5 times its current market capitalisation," it said in a note.
It said the company has remaining 10,397 hectares of freehold land in Johor, of which 2,555 hectares are located in the Iskandar region, making it one of the largest land owners in Iskandar.
The company has two active township projects in Johor - at Kulai and Batu Pahat. Since the 1990s, Genting Plantations has been monetising some of its prime estate land via property developments.
Maybank IB said Genting Plantations has focused on aggressively growing its oil palm planted area from 48,710 ha in 2003 to 138,301 ha in 2022, translating to a compound annual growth rate of 5.4 per cent.
As land values in Malaysia appreciate, most of its oil palm expansion over the last two decades shifted to Indonesia.
"Naturally, the oil palm division is the larger profit contributor, accounting for 67 per cent to 95 per cent of its yearly group core profit before interest and tax over the past 10 years, with the balance contributed by the property division."In the past, the property division has helped to weather the earnings of the group during periods of low oil palm profits," it added.
Maybank IB has an unchanged target price of RM6.08 a share for Genting Plantatiosn stock.
Several risk factors Maybank IB's earnings estimates, target price and rating for Genting Plantations are weather anomalies resulting in poorer-than-expected output growth; lower-than-expected crude palm oil price achieved; (iii) negative policies imposed by import countries; unfriendly policies imposed by the Malaysian and Indonesian government on upstream or downstream segments; sharply lower crude oil prices, which makes palm biodiesel demand not viable; and weaker competing oil prices (like soybean and rapeseed).