KUALA LUMPUR (July 22): Genting Plantations Bhd’s (KL:GENP) recent acquisition of land in Bogor, Greater Jakarta, will increase its estimated end-FY2025 net debt of RM1.23 billion (22% net gearing) to RM1.58 billion (29% net gearing), which remains manageable.
Kenanga Research mentioned in a note on Monday that it trimmed its earnings forecast for FY2025 (FY2025F) by 3% to account for higher finance costs, while noting that property sales from Sentul City are unlikely to come in within its forecast period.
The research firm has maintained its target price (TP) of RM6.00 on the stock, based on 1.0 time price-to-book value (PBV), "in line with the plantation sector’s one- to two times PBV ratio".
Notably, GENP is acquiring 355 acres of land with Hak Guna Bangunan (with an initial tenure of up to 2028-2053, with extensions of 20 years + 30 years) in Sentul City, Bogor — a major satellite city of Greater Jakarta — for (Indonesian rupiah) IDR 2,052 billion (RM593 million).
“Sentul City is not new to GENP. Three years ago, GENP paid RM127 million or RM5.7 million/acre for a nine-ha (hectare) commercially zoned land in Sentul City,” said Kenanga.
“At an average price of IDR 5.47 billion or RM1.58 million per acre, we believe GENP is paying a fair price,” it added.
A quick check on Indonesia-based property portals revealed that asking prices for larger land tracts (eight- to 18 acres) in Sentul City, Bogor, range from IDR4.1 billion to IDR10.1 billion (RM1.18 million to RM2.92 million) per acre.
GENP will also be paying RM246 million out of the RM593 million consideration, on a staggered basis over five year, noted the research firm.
Kenanga’s report noted that there are inevitable foreseeable risks as well.
These include the Western hostility towards palm oil on biodiversity conundrums, the possible impact of weather and labour shortages on production, and the arguably weak crude palm oil (CPO) and palm kernel (PK) prices.
“We believe Greater Jakarta can support two- to three premium outlets types of malls. Comprising Central Jakarta and five other cities — Bogor, Depok, Tangerang and Bekasi (and further extended to include Puncak and some part of the Cianjur Regency), Greater Jakarta is also known as “Jabodetabekpunjur” (comprising the first two or three letters of the six cities),” Kenanga said.
Greater Jakarta is spread across 6,800 km2 (square kilometres), home to 33 million people (versus 34 million people in Malaysia), and further generates US$400 billion to US$450 billion in annual gross domestic product (GDP).
This compares to Malaysia’s and Singapore’s respective GDPs of US$400 billion and US$500 billion a year.