KUALA LUMPUR: Genting Plantations Bhd’s venture into the vegetable seeds business could accelerate its diversification beyond palm oil and unlock recurring income from high-value crops, Public Investment Bank Bhd (PublicInvest) said.
Under the joint venture (JV) agreement, Genting Plantations will establish two JV companies with Shouguang Vegetable Science and Technology S/B (SVST).
Genting Plantations will hold a 60 per cent stake through AGCT Vegetable AgVentures S/B, while SVST will own the remaining 40 per cent in both JV companies.
The collaboration aims to develop about 28 hectares in Kulai, Johor, into a tropical vegetable centre of excellence, serving as a hub to promote sustainable growth and strengthen food security.
PublicInvest noted that leveraging SVST’s vast experience could help accelerate the business development.
“The new business venture will help Genting Plantations reduce its heavy reliance on the upstream palm oil segment while unlocking a recurring revenue stream in the high-value vegetable crops market.
“Genting Plantations plans to fund the business through internal funds or bank borrowings, which should not pose an issue given its current low gearing position of 0.23 times and sizeable cash reserves of RM1.9 billion.
“Based on Genting Plantations’ 60 per cent stake in both JV companies, it is required to fork out about RM315 million,” it said in a research note.
Separately, PublicInvest said Genting Plantations’ second quarter results for the financial year 2025 are scheduled to be released on Aug 27, and it expects another solid performance.
This outlook is underpinned by steady crude palm oil prices and moderate fresh fruit bunch production growth.
The firm has reiterated its “Outperform” call on Genting Plantations, with an unchanged target price of RM5.61.
Meanwhile, CIMB Securities Sdn Bhd views the proposed JV as neutral, noting that it will broaden the group’s exposure to seed breeding, research and development (R&D), and greenhouse production.
However, it expects limited near-term earnings contribution due to the likely high upfront capital expenditure (capex).
“Genting Plantations’ 60 per cent share of the potential investment in the JV companies amounts to about RM315 million, and we believe the project is unlikely to be earnings-accretive in the near term given the substantial upfront capex required for technology acquisition and seed-breeding R&D facilities.
“The JV also represents a diversification away from Genting Plantations’ core palm oil business.
“That said, proceeds from its recent disposal of agricultural land in Melaka to Scientex Bhd for RM333.8 million should be sufficient to fund this investment,” it noted.
CIMB Securities has maintained a “Hold” rating on Genting Plantations with an unchanged target price of RM5.28.
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