This article first appeared in Capital, The Edge Malaysia Weekly on November 6, 2023 - November 12, 2023

Target price: RM6.08 BUY

MAYBANK INVESTMENT BANK RESEARCH (OCT 29): Few planters qualify as real estate players, and Genting Plantations (GenP) is one of them. At an (unadjusted) enterprise value per planted hectare of just RM41,000, GenP is attractively priced as the market has underappreciated the value of its 16,908ha of strategic freehold land and other assets. GenP trades at just 0.9 times PBV (-2.3 standard deviation of 10-year mean) and 0.33 times our revised net asset value (RNAV) estimate of RM15.88 per share. GenP is a “buy”, with an unchanged target price of 19 times FY2023 PER (-1 standard deviation of its eight-year mean). Its immense RNAV offers downside support while its valuable land bank offers a good inflation hedge over the long run.

GenP is one of the largest freehold land owners in Peninsular Malaysia with 16,908ha, of which 61% is located in Johor, 18% in Melaka and Negeri Sembilan, 18% in Kedah and Perak, and 3% in Selangor (specifically Sepang). GenP continues to carry these valuable assets on its books. As these lands have been amassed progressively since 1981 and are strategically located in highly populated areas of the west coast of the peninsula, we estimate its freehold land to be worth RM7.25 billion, or 1.5 times its current market cap.

GenP still has 10,397ha of freehold land in Johor, of which 2,555ha are located in Iskandar Malaysia, making it one of the largest landowners in the Iskandar region. The company has two active township projects in Johor — in Kulai and Batu Pahat. Since the 1990s, it has been monetising some of its prime estate land via property developments.

GenP has focused on aggressively growing its oil palm planted area from 48,710ha in 2003 to 138,301ha in 2022, translating into a CAGR of 5.4%. As land value in Malaysia appreciated, most of its oil palm expansion over the last two decades has shifted to Indonesia. Naturally, the oil palm division is the largest profit contributor, accounting for 67%-95% of its yearly group core PBIT (profit before interest and taxes) over the past 10 years, with the balance contributed by the property division. In the past, the division helped to weather the earnings of the group during periods of low oil palm profits.

Target price: 80 sen ADD

CGS-CIMB RESEARCH (OCT 30): Malakoff has proposed to acquire a 49% stake in E-Idaman for RM133 million, giving it exposure to waste management services in Perlis and Kedah. We view the deal positively as it strengthens the company’s position in waste management services, in addition to being earnings accretive. We reiterate our “add” call and target price.

In 2022, E-Idaman registered a revenue and net profit of RM293 million and RM28 million respectively, implying an acquisition multiple of 9.6 times PER, which we find reasonable for a concession-type asset with a remaining 10-year tenure. Assuming all else remains equal, profit levels hold and taking into account loss of interest income, we estimate incremental earnings of about RM9 million for Malakoff from the proposed 49% associate stake, potentially enhancing overall group 2024 profit after tax by about 4%. Having said that, E-Idaman is expected to record a significant increase in revenue, according to the announcement. However, no details were provided for this.

We view the deal positively as it further strengthens the group’s waste management and environmental solutions segment. Currently, Malakoff owns the concession to provide solid waste management services in Kuala Lumpur, Putrajaya and Pahang, handling about 3,200 tonnes per day.

Fair value: RM1.80 BUY

AMINVESTMENT BANK RESEARCH (OCT 30): Our FY23-25 earnings are maintained as 9MFY23 earnings came within expectations, accounting for 72% of both our and consensus’ estimates. Moreover, we continue to hold a positive outlook on the stock, owing to CTOS’ multifaceted approach to driving future earnings growth. We understand that the group is prospecting for five new clients for the new digital lending platform for moneylenders, which is a collaboration with Juris Tech.

CTOS also completed the acquisition of Finscore and Prime Analytics in October. This strategic move is poised to enhance its market presence in the Philippines and Indonesia, offering an extensive range of credit-related products and services. We are optimistic about the potential impact of these acquisitions and have factored in their anticipated incremental contributions to our FY24 earnings.

CTOS received the Ministry of Finance’s approval for a second five-year extension of tax exemption from November 2021 to November 2026. The group has announced a likely reversal of RM27.8 million in tax provisions in 4QFY23, subject to the finalisation of tax computation. The stock is trading at an undemanding FY2024 PER of 26 times, below its five-year mean of 35 times.

Target price: RM2.04 BUY

RHB RESEARCH (OCT 30): Axis REIT’s 9MFY23 earnings missed expectations due to lower-than-expected revenue growth. Its FY23 numbers may indicate a low-performing year due to higher expenses and lower occupancy rates. However, the commencement of a lease with SPX Xpress in August, the signing of new tenancy agreements and the completion of other major developments lead us to expect FY24 to be a much stronger year.

With interest rate hikes nearing an end and no further provisions needing to be made, costs should be under control next year on top of higher revenue growth. SPX Xpress’ tenancy at Bukit Raja Distribution Centre 2 brings in a monthly rental income of RM1.35 million, making it the REIT’s fourth-largest tenant. With Shah Alam Distribution Centre 3 back to full occupancy, only 10 properties are left with occupancy rates below 90%.

We trim FY23 earnings by 8% after adjusting our occupancy rate and cost assumptions, while keeping FY24-25 net profit unchanged. As such, we lower our target price from RM2.08. Our target price incorporates a 2% ESG premium, based on our in-house methodology. Key risks include the non-renewal of its expiring leases and increased competition. 

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