GENTING PLANTATIONS' JAKARTA LAND ACQUISITION TO IMPACT NET DEBT, GEARING IN FY2025 - RESEARCH HOUSES

KUALA LUMPUR, July 22 (Bernama) -- Genting Plantations Bhd's new land acquisition via its indirect wholly owned Indonesian subsidiaries would impact the company's net debt and net gearing in financial year 2025 (FY2025), said research houses.

Genting Plantations' units have 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 the objective of its Indonesian expansion.

PT Genting Properti Abadi is acquiring 80 hectares within the Sentul City township 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. 

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The proposed acquisitions are expected to be completed in the first quarter of 2025.

In a note, Kenanga Investment Bank Bhd said the acquisition would increase the company's estimated end-FY2025 net debt of RM1.23 bilion (22 per cent net gearing) to RM1.58 billion (29 per cent net gearing), which is still quite contained and manageable.

"We believe Genting Plantations is probably also laying the groundwork for another possible Premium Outlets in Greater Jakarta and the potential property demand uplift following such an opening. 

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"Therefore, we trim our FY2025 forecast earnings by three per cent 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 Investment maintained a "Market Perform" call on the company with a target price of RM6.00. 

Meanwhile, Maybank Investment Bank Bhd also maintained its earnings forecasts as the land acquisition would increase Genting Plantations' proforma net gearing (as at end of March 2024) to 34 per cent from 22 per cent, if the entire purchase consideration is paid upfront.

On the other hand, Hong Leong Investment Bank Bhd noted 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 target price of RM5.80 and "hold" rating on Genting Plantations for now, pending more updates from management," it said.

-- BERNAMA