MONDAY, MAY 16: KUALA LUMPUR- Felda Global Ventures Holdings Bhd Group President/Chief Executive Officer Zakaria Arshad (pic) to unveil FGV's Transition Plan, Casa Heliconia, Jalan Maktab Enam, Off Jalan Perumahan Gurney, Kuala Lumpur at 0900 (0100 GMT) KUALA LUMPUR- ASEAN Intergovernmental Commission on Human Rights (AICHR) organises regional forum on media and human rights at Istana Hotel at 0900 (0100 GMT) KUALA LUMPUR- Dewan Rakyat sitting at 1000 (0200 GMT)
KUALA LUMPUR: CIMB Equities Research is more optimistic on Felda Global Ventures’ (FGV) prospects for the remaining quarters due to higher production of crude palm oil (CPO), fresh fruit bunches (FFB) and prices.
It said on Wednesday FGV is targeting a 40% on-quarter improvement in FFB output for 2Q FY16.
“This, coupled with an improving CPO price to RM2,567 per tonne currently (+11% from the 1Q average), will boost plantation contributions. Sugar earnings are expected to improve from festive demand and the removal of approval permits for imported refined sugar,” it said.
CIMB Research said FGV group president and CEO Datuk Zakaria Arshad had revealed plans to cut its administrative costs by RM100mil in the current year and boost the profitability of its existing assets, in particular the yields of its palm oil estates.
“The group will also be putting all M&A activities on the back burner and plans to cut off funding to underperforming assets in the group,” it said.
CIMB Research maintained its earnings forecasts and maintain our non-consensus Add call on the group as we see value emerging from the new CEO’s efforts to improve earnings.
“Our target price is supported by the group’s net book value (NBV) of RM1.73 and dividend yield of 3%-5%.
“Potential re-rating catalysts would be stronger FFB yields and improving earnings. The main downside risk to our target price is execution risks on plans to improve earnings,” it said.
CIMB Research said FGV posted a core net loss of RM61m for 1Q16 due to weak plantation earnings. The 1Q core net loss trailed consensus expectations but was broadly in line with CIMB Research.
FGV reported a core net loss of RM61mil (US$17mil) in 1Q16 due mainly to weaker plantation and sugar earnings as well as higher fair value changes in to land lease assets liability (LLA). The losses would have been wider if not for higher associates’ earnings.
“We consider the 1Q results to be broadly in line with expectation as we project higher FFB output, CPO prices and lower administrative costs in subsequent quarters to boost earnings,” it said.
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