UOB Kay Hian
Date of Report: 20 August 2025

Genting Plantations Bhd: Navigating Softer CPO Prices and Strategic Diversification – 2Q25 Earnings Preview & Full Analysis

Overview: Genting Plantations’ Position in 2025

Genting Plantations Bhd (GENP MK), a diversified player in plantations, property development, and retail, faces a challenging 2Q25 as lower crude palm oil (CPO) prices and increased fertilizer costs weigh on earnings. Despite these headwinds, GENP is advancing strategic initiatives, including a major agribusiness joint venture, while maintaining a stable financial footing. UOB Kay Hian maintains a HOLD recommendation with a target price of RM4.70, reflecting a cautious stance amid industry volatility.

Stock Snapshot: Key Metrics and Shareholder Structure

• Share Price: RM4.95
• Target Price: RM4.70 (Downside: -5%)
• Market Cap: RM4,441.0m (US\$1,053.2m)
• 52-week High/Low: RM6.34 / RM5.08
• Major Shareholders: Genting Berhad (53.6%), Employees Provident Fund Board (15.0%)
• Shariah Compliant: Yes

2Q25 Earnings Preview: Softer ASPs and Cost Pressures

GENP is set to report its 2Q25 results on 27 August. The core earnings forecast is RM90m-RM100m, representing a 25-30% quarter-on-quarter decline from 1Q25’s RM133m. The key drivers behind this expected drop include:

• Softer Average Selling Prices (ASPs): Both CPO and palm kernel (PK) spot prices were weaker through 2Q25.
• Rising Unit Production Costs: GENP accelerated fertiliser application after a slow 1Q25 (only 11% of annual target applied in 1Q), increasing costs in 2Q25.
• FFB Production Rebound: Fresh fruit bunch (FFB) output is expected to rise 15% quarter-on-quarter in 2Q25, partially offsetting margin pressures.

Strategic Expansion: Agribusiness Hub Joint Venture

GENP is expanding beyond its traditional plantation business through a proposed joint venture in Johor:

• Partnership: ACGT Vegetable AgVentures (AVA, a GENP subsidiary) and China’s Shouguang Vegetable Science and Technology (SVST).
• Project Scope: Develop 70 acres in Kulai, Johor into a centre of excellence for tropical vegetable crops.
• Ownership Structure: AVA 60%, SVST 40% in both the Technology and Operating JV companies.
• Capital Commitments: Target paid-up capital: RM210m (Technology JV), RM315m (Operating JV). GENP will inject capital, while SVST contributes technology and resources.
• Strategic Rationale: Leverage GENP’s genomics and SVST’s seed-to-fork expertise to develop high-yield, climate-resilient crops, diversify GENP’s revenue base, and support food security.
• Timeline & Impact: Completion targeted for 1Q26. The JV will not affect GENP’s share capital or FY25 earnings materially. Funding (RM315m) will be via cash and/or borrowings, with net gearing expected to rise modestly from 0.27x to about 0.3x post-funding.

Financial Performance and Outlook

Operational Trends: Production Recovery and Cost Management

• Production Recovery: GENP’s FFB output showed signs of improvement, with July 2025 volumes up 10% year-on-year, bringing 7M25 year-to-date growth to +0.7%.
• FFB Growth Guidance: Management maintains a 5% FFB output growth target for 2025.
• Cost Pressures: Fertilizer application, delayed from 1Q25, led to higher sequential production costs but is necessary to support output growth.

Earnings Outlook and Valuation

• No changes were made to earnings estimates, as the new JV is not expected to materially impact FY25 results.
• Target price remains at RM4.70, pegged at 12x 2025F PE (one standard deviation below GENP’s five-year mean).

Key Re-Rating Catalysts

• Higher-than-expected CPO prices
• Lower production costs
• Stronger-than-expected FFB production
• Improved performance in property segment

Environmental, Social, and Governance (ESG) Initiatives

Environmental:

• Active preservation of biodiversity in high conservation value (HCV) and high carbon stock (HCS) areas.
• Adoption of RSPO’s New Planting Procedure and a robust Sustainability Policy.
• Commitment to lower chemical and biochemical oxygen demand by 2050 to improve water quality.

Social:

• Community outreach on sustainable farming practices.
• Scholarships via the Tan Sri (Dr.) Lim Goh Tong Endowment Fund.
• Migration of Occupational Safety and Health Management System (OSHMS) to ISO 45001 by 2025, aligning with national standards.

Governance:

• Implementation of Whistleblower Policy, Code of Conduct and Ethics, and Anti-Bribery and Corruption System Policy, all in line with best governance practices.

Key Financial Assumptions for FY25F

• FFB production growth: 5% YoY
• CPO price assumption: RM4,200/tonne
• Downstream margin: 1%

Balance Sheet and Cash Flow Summary

Cash Flow Highlights

• Operating cash flow expected to remain robust in 2025F at RM622m, supported by stable pre-tax profit and disciplined capital expenditure.
• Dividend payments projected at RM175m in 2025F, reflecting GENP’s continued commitment to shareholder returns.
• Net cash outflow is estimated at RM41m for 2025F, as capital investment in the JV and maintenance capex are balanced against cash inflows.

Conclusion: Navigating Near-Term Headwinds, Building for the Future

Genting Plantations faces a challenging near-term earnings outlook due to softer CPO prices and higher input costs. However, its recovery in production, prudent financial management, and strategic diversification into high-growth agribusinesses position it for resilience and future upside. Investors are advised to maintain a HOLD stance, watching for catalysts such as stronger CPO prices, cost improvements, and successful execution of new ventures.