Genting Plantations earnings to face setback

PETALING JAYA: The hefty RM96.6mil administrative fine imposed on Genting Plantations Bhd’s subsidiary, PT Susantri Permai by Indonesia’s Forest Area Enforcement Task Force, will likely negatively impact Genting Plantations’ earnings in the upcoming quarters, say analysts.

PT Susantri Permai has fully paid the fine, while the authority is still finalising the interim notice.

In a note to clients, CIMB Research said it viewed this development as negative for Genting Plantations, as the already paid administrative fine will likely need to be recognised in the group’s financials, potentially in the fourth quarter of 2025 (4Q25) or 1Q26.

The research house noted the fine implies a potential 26.5% downside to its current financial year 2025 (FY25) core net profit forecast of RM364mil, or a 10.8 sen impact on net book value, but it is expected to be one-off.

The final dividend may also face downside risk if the board chooses to conserve cash following the payment.

CIMB Research has maintained a “hold” rating on the stock with a target price of RM5.44 per share.

Hong Leong Investment Bank (HLIB) Research analyst Chye Wen Fei said, “At the time of writing, we are unsure of the timing of the recognition of the fine.

“Based on our estimates, the fine will result in a loss of interest income of RM3mil to RM4mil (roughly less than 1.5% of our projected FY25 core net profit), assuming that the provision of the fine will be recognised in its 4Q25 financial results due out by end-February.”

Pending further clarification from management, HLIB Research said it made no changes to its earnings forecast on Genting Plantations.

It also kept a “buy” call on the stock with an unchanged target price of RM5.76.

Phillip Capital Research in its quick bites comment expects the fine could negatively impact Genting Plantations’ 2026 earnings.

This is as the RM96.6mil fine is significant, accounting for about 30% of its 2026 earnings forecast of RM320.6mil that will likely be classified as an exceptional item.

This follows the RM159mil impairment recognised in the first half of last year related to gazetted land in Indonesia, highlighting the ongoing regulatory risk in the country.

Looking ahead, Genting Plantations might face the loss of 3,000 to 4,000 ha of land (2% to 3% of its total planted landbank), subject to further clarification in the upcoming results briefing.

Phillip Capital has a “hold” rating on the stock with a target price of RM5.36.

Similarly, Kenanga Research is also unclear whether the RM97mil fine is all Genting Plantations will have to face, in which case the group has over provided.

On the other hand, its land may be re-zoned or confiscated later following this interim fine.

If so, Genting Plantations may have under-provided by RM138mil.

This is as the RM159mil provided year-to-date is about 80% of the potential full amount of around RM200mil, and Genting Plantations still has to pay for the current interim administrative fine of RM97mil.

Hence, Kenanga Research has trimmed its FY25 net profit forecasts, but FY25 to FY26 core net profit forecasts are still left intact.

It has also kept the target price at RM5.10.

Maybank Investment Bank (Maybank IB) Research has a “buy” call on Genting Plantations given its still attractive dividend yields of over 5%.

The research house noted that the one-off payment although sizeable is manageable for Genting Plantations.

It remains unclear the size of the estate land surrendered and its impact on the group’s future growth and earnings.

This one-off fine of RM97mil equates to 23%/28% of the research house’s headline/core profit after tax and minority interest (Patmi) for FY25.

“We have now imputed the fine into our FY25 forecasts as a one-off item and pre-emptively trimmed our FY26 to FY27 fresh fruit bunch output estimates by 3% to reflect lower output going forward in anticipation that the estate land affected will be surrendered to the Indonesian government,” it said.

As a result, Maybank IB has also cut its FY26 to FY27 core Patmi by 5.8% and 4.6%, respectively.