Genting Plantations has proposed to dispose of three parcels of agricultural land with a total land size of 528 acres in Melaka Tengah for a total cash consideration of RM333.8m or RM14.50 psf to a subsidiary company under Scientex. The proposed land sale is expected to contribute a lucrative one-off gain of about RM284.9m or additional EPS of RM0.32 to the FY25 performance. Pending the completion of the land sale, we make no changes to our earnings forecast. Maintain Outperform with an unchanged SOP-based TP of RM6.81.

• Salient details of the proposed land sale. The subject land is made up of three parcels of land with a total land size of 528.488 acres. It is currently an oil palm estate with free-hold title. It is situated in Mukim Paya Rumput, Melaka Tengah, Melaka, about 14km from the north-west of the Melaka city centre. It is accessible via the Sungai Udang-Paya Rumput-Ayeh Keroh Highway and the Alor Gajah-Melaka Tengah-Jasin Highway, with an approximate driving time of 25min to the Melaka city centre. Within the surroundings of the subject land are residential projects such as Taman Bertam Setia, Taman Paya Emas and Taman Paya Rumput Perdana as well as retail malls such as Lotus's Melaka, NSK Trade City and Family Store Bukit Rambai.
• A windfall. According to the announcement, the subject land was acquired in 1981 at an original cost of investment of RM2.1m or based on RM0.09 psf, giving the group a lucrative one-off gain of approximately RM284.9m (after tax and related expenses). It is worth noting that the subject land has a net book value of only RM4.42m as of FY23. The land sale gain of RM284.9m or RM0.32 per share is expected to be recognised in the second half of 2025. Apart from that, the group could also save the replanting cost estimated at RM6m as the oil palm trees of the subject land are approaching the old age category, which is deemed for replanting soon.
• Impact on our earnings forecast. Upon completion of the proposed land sale, we see minimal impact from the loss of earnings as it only made up less than 1% of the group's planted area or about 0.7% to our FY21-23 earnings. Meanwhile, the group's gearing ratio will improve from 27.8% to 26.8% while the net asset will increase from RM5.95 to RM6.26. The group plans to use the proceeds for the i) future potential acquisition of greenfield/brownfield oil palm estates, ii) property development activities, and iii) /or paring down the external borrowings within an estimated frame of 2 to 24 months.

Source: PublicInvest Research - 27 Jan 2025