TA Research adjusted FGV’s earnings forecasts for FY24 to FY26 upwards to a range of 3.8% to 65.3%.
PETALING JAYA: Analysts are still cautious about FGV Holdings Bhd
’s prospects, despite improvement in the group’s latest second quarter of the financial year 2024 (2Q24) results.
FGV posted a core net profit of RM102.8mil in 2Q24 from a loss of RM26mil in the same corresponding period last year.
TA Research said FGV’s results exceeded its expectations, primarily due to improved margins.
The research house adjusted FGV’s earnings forecasts for FY24 to FY26 upwards to a range of 3.8% to 65.3%.
The forecast adjustment followed the group’s better-than-expected results for the first half of 2024 (1H24), better margins and higher fresh fruit bunch (FFB) production, TA Research said in a report yesterday.
The research house said some of the key highlights from FGV’s results briefing include management expecting crude palm oil (CPO) prices to remain between RM3,800 and RM4,000 per tonne for FY24.
In addition, FFB production guidance for FY24 remained unchanged, with an expected growth rate of 10% to 15%, supported by improved yield and the easing of labour shortages.
The group also submitted its petition to the United States Customs and Border Protection in June, seeking to modify the Withhold Release Order (WRO) placed on FGV’s shipments.
“The management anticipates that the process of lifting the WRO will span nine to 12 months,” said TA Research.
Meanwhile, FGV produced its first batch of crude palm kernel oil compliant with the European Union Deforestation Regulation (EUDR).
However, it remains to be seen whether the documentation has been processed or approved by the EUDR system.
According to FGV’s management, there are significant costs associated with meeting all the EUDR requirements and they believe that the premium paid by customers should offset the expenses.
TA Research maintained a “sell” call on FGV with a revised target price of RM1.19.
Meanwhile, Hong Leong Investment Bank Research said it considers FGV’s results within its expectation, but below consensus as it expected 2H24 to come in stronger versus 1H24 on the back of seasonally higher FFB output.
The research house maintained its earnings forecasts for FGV with a “hold” call on the stock.
It has also lowered FGV’s target price to RM1.30 a share following an update on the group’s listed subsidiary MSM Malaysia Holdings Bhd’s share price having fallen by over 50% over the past three months.
MIDF Research maintained its “neutral” call on FGV with a revised target price of RM1.31.
