• GENP is expanding its Indonesia property exposure, which currently consists of 9ha in Sentul City and the upcoming Jakarta Premium Outlet.

• It will acquire 2 parcels of land at what we believe is an attractive price compared to its previous purchase in Sentul City.

• We maintain our estimates and target price. This note marks the transfer of coverage of GENP to Jacquelyn Yow.

Land acquisition in Indonesia

• Genting Plantations (GENP) announced on 19 Jul 24 that it is acquiring 2 contiguous parcels of land of approximately 152 hectares (ha) within the Sentul City township, in the Bogor Regency of the West Java Province in Greater Jakarta, from PT Sentul City Tbk (Not Rated) and its related companies.

• The total purchase consideration is about RM593m, according to GENP. We keep our estimates pending further details on the acquisition and potential development plans.

Positive for GENP

• We believe the deal is positive for GENP as it expands its footprint in the Indonesia property development business. The landbanks are located about 1 hour from the Jakarta central business district. Meanwhile, Sentul City’s accessibility will be enhanced with the upcoming LRT and 2 new toll roads, in our view.

• We also believe this acquisition is strategic for GENP as it is in addition to its current landbank in Sentul City. Note that GENP, in a JV with Simon Property Group (Not Rated) is also constructing the Jakarta Premium Outlet in West Jakarta.

Attractive land pricing

• The total consideration of ~RM593m (Rp2,052bn) for the 152ha land translates into RM3.90m/ha, cheaper than its previous transaction within PT Sentul City where it purchased 9.4ha around the same area in 2021 for RM13.77m/ha. Hence, we reckon the pricing is attractive.

• Having said that, we opine the land cost is cheaper mainly due to the larger size and land conditions, hillier and covered by bushes and trees, which may require greater development/construction costs compared to the previous piece of land, which was more developed and located right opposite Ikea and Aeon Mall.

Valuation and recommendation

• We retain our Add call on GENP, premised on our projected growth in sales volumes for the plantation segment over FY24-25F and our target price, based on a hybrid (core business based on GGM valuation and undeveloped land bank in Johor at a 50% discount to market value) TP of RM6.62.

• Potential re-rating catalysts are recovery in profits, driven by the plantation and property segments. Downside risks include lower-than-expected average CPO price and production and slower demand within its property segment.

  Source: CGS-CIMB Research - 23 Jul 2024