GENP’s venture into palm oil derivatives with technology partner Elevance is long-term positive.
Expect muted financial impact until 2017 when the plant starts operation.
Maintain HOLD on GENP and unchanged SOP-TP of MYR11.20.
GENP proposes to sell a 25%-equity stake in Genting Integrated Biorefinery Sdn Bhd which owns the biodiesel plant to Elevance for MYR72m cash. In return, Elevance (which owns the patentprotected metathesis technology) will be paid ~MYR89.5m (or USD28m) in cash for technology transfer (license and design fee).
We expect muted financial impact on GENP in the near-term as earnings contributions from this plant will be 3 years away. While no guidance was provided, the plant could generate ~MYR19m p.a. in PATAMI for GENP, we estimate, relatively small compared to our FY16F net profit forecast of MYR543m for GENP (or 3.5%).
Source: Maybank Research - 14 Jul 2014
Expect muted financial impact until 2017 when the plant starts operation.
Maintain HOLD on GENP and unchanged SOP-TP of MYR11.20.
What’s New
GENP unveils its downstream plan for its 200,000 MT p.a. biodiesel plant which was acquired opportunistically back in 2011. The biodiesel plant will be transformed into a metathesis plant to produce high value palm oil derivatives such as olefins, specialty chemicals and saturated methyl esters.GENP proposes to sell a 25%-equity stake in Genting Integrated Biorefinery Sdn Bhd which owns the biodiesel plant to Elevance for MYR72m cash. In return, Elevance (which owns the patentprotected metathesis technology) will be paid ~MYR89.5m (or USD28m) in cash for technology transfer (license and design fee).
What’s Our View
The conversion plan is not a surprise to us as GENP has always guided that its Lahad Datu (Sabah) biodiesel plant purchased in 2011 was opportunistic and meant to be converted for other purpose. We are long term positive on GENP’s latest venture; the metathesis plant will only be ready for commercial operation by 2017. We believe the palm oil derivatives producer model is a better business model than biodiesel.We expect muted financial impact on GENP in the near-term as earnings contributions from this plant will be 3 years away. While no guidance was provided, the plant could generate ~MYR19m p.a. in PATAMI for GENP, we estimate, relatively small compared to our FY16F net profit forecast of MYR543m for GENP (or 3.5%).
Source: Maybank Research - 14 Jul 2014
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