PETALING JAYA: Genting Plantations Bhd
is on the right track to carve out a sustainable future with its enhanced seed yields and agricultural management solutions, says Maybank Investment Bank (Maybank IB) Research.
The plantation group is now trading at an unadjusted enterprise value over planted hectarage of just RM42,000, making the stock attractively priced relative to other large caps, it said.
After a recent working visit to Genting Plantations’ research and development (R&D) facility in Selangor, Maybank IB Research said it came away more bullish about the outlook of the group.
The R&D facility, which measures 1,067 acres and is located adjacent to the Sepang F1 Circuit, houses important R&D work that will define and shape the group’s future.
“Despite embarking on genome sequencing on oil palm since 2006, we understand that Genting Plantations only received its seed production licence from the Malaysian Palm Oil Board in 2019, as the regulatory board has a stringent requirement of showing at least seven years of data collection and records,” Maybank IB Research said.
It said the plantation company is also targeting to make available its high yielding GT-9 genomic seeds to the market next year, once it increases its seed production capacity to five million trees per acre (TPA) from the current one million TPA.
The research house said the GT-9 seeds have the potential to deliver about 30 tonnes of fresh fruit bunch (FFB) per ha upon hitting prime maturity.
This represents a marked improvement over Genting Plantations’ annual average FFB yield of 17.7 tonnes per ha from 2018 until 2022.
“Besides oil palm seedlings, the group’s R&D team is also keen to study and expand into other cash crops such as maize, paddy, melon and vegetables in addressing national food security,” it added.
Operationally, Maybank IB Research said Genting Plantations is showing clear signs of steady output recovery, as the group’s output for August hit a 33-month high at 0.19 tonnes to bring its FFB output for the first eight months of 2023 to 1.34 tonnes.
The research house observed that the production rise represented a 5.3% year-on-year (y-o-y) growth and is on track to meet the group’s production increase expectation of 5% y-o-y for 2023.
Underpinned by these positive factors, Maybank IB Research has upgraded its “hold” call on the counter to a “buy”, with a 12-month target price of RM6.08.
The key risks to its call include weather anomalies resulting in poorer-than-expected output growth, lower-than-projected crude palm oil price achieved as well as negative policies possibly imposed by importing countries.
