Genting Q1 profit on track despite one-off charges
KUALA LUMPUR: Genting Plantations Bhd's core net profit of RM121 million in the first quarter (Q1) 2025 met expectations, accounting for 39 per cent and 38 per cent of CIMB Securities Research's and Bloomberg consensus full-year estimates, respectively.
The research house considers this to be in line with expectations, as it expects weaker earnings in the coming quarters for Genting Plantation due to lower crude palm oil (CPO) prices and higher production costs.
Reported net profit, however, the firm said, came in significantly lower at RM61 million, mainly due to RM72 million in impairment charges.
"Of this, RM66 million was related to the provision for potential income loss from some parts of its Indonesian planted estates that have been demarcated as forest land by the Indonesian government under a recent regulation.
"No dividend was declared in Q1 2025, in line with expectations," it said.
Meanwhile, CIMB Securities said the negative surprise this quarter was a RM66 million impairment on Genting Plantation's Indonesian bearer plants, arising from the likely reclassification of some parts of its mature oil palm estates as forest land by the Indonesian government.
The firm has maintained its Hold rating but lowered its target price to RM5.28 per share, applying a higher 20 per cent discount (from 15 per cent) to its sum-of-parts (SOP) valuation to reflect growing regulatory risks in Indonesia.
"The higher discount reflects increasing regulatory risks in Indonesia, where 57 per cent of Genting Plantation's planted estates are located.
"It also captures our earlier concerns about Genting Plantation's proposed RM676 million acquisition of two land parcels (totalling 152 ha) in Jakarta for property development — a segment in which the company has no prior track record in Indonesia, posing execution risks," it said.
On a positive note, CIMB Securities said Genting Plantation recently completed the sale of 213.9 hectares of land in Mukim Paya Rumput, Melaka, to Scientex for RM333.8 million.
The transaction, completed on 21 May, will allow Genting Plantation to recognise a one-off net gain of RM284.9 million, it added.
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