The oil palm plantation operator stated that its units acquired two parcels of contiguous land in Jakarta totalling 152 hectares for 2.052 trillion rupiah (RM593 million) to undertake property development-related activities, in line with its Indonesian expansion objectives.
It said PT Genting Properti Abadi is acquiring 80 hectares within the Sentul City township, Bogor Regency in West Java Province of Indonesia for RM509.8 million, while PT Genting Properti Jaya is buying a 72-hectare parcel contiguous with the former land for RM83.2 million.
“The proposed acquisitions are expected to be completed in the first quarter of 2025 (Q1 2025),” it said.
In a statement, Kenanga Investment Bank Bhd (Kenanga IB) said the acquisitions would increase the company’s estimated end-FY2025 net debt of RM1.23 billion (22% net gearing) to RM1.58 billion (29% net gearing), which is still quite contained and manageable.
“We believe Genting Plantations is also laying the groundwork for another possible premium outlet in Greater Jakarta and the potential property demand uplift following such an opening.
“Therefore, we trim our FY2025 forecast earnings by 3% to account for higher finance cost, while property sales from Sentul City are unlikely to come in within our forecast period,” it said.
As such, Kenanga IB maintained a “Market Perform” call on the company with a target price (TP) of RM6.
Meanwhile, Maybank Investment Bank Bhd also maintained its earnings forecasts as the land acquisition would increase Genting Plantations’ proforma net gearing (as at the end of March 2024) to 34% from 22%, if the entire purchase consideration is paid upfront.
On the other hand, Hong Leong Investment Bank Bhd (HLIB) noted that the latest proposed acquisitions would result in Genting Plantations’ net debt and net gearing increasing to RM1.7 billion and 0.32 times from RM1.2 billion and 0.22 times as at March 3, 2024.
“Earnings impact, on the other hand, will likely be muted in the near- term.
“We maintain earnings forecasts with a TP of RM5.80 and “Hold” rating on Genting Plantations for now, pending more updates from the management,” HLIB said.