MARKET DEVELOPMENT
HwangDBS Maintains Its \"Hold\" Call on Felda Global, Target Price RM4.40
HwangDBS Maintains Its \"Hold\" Call on Felda Global, Target Price RM4.40
10/07/2013 (The Star) - HwangDBS Vickers Research is maintaining its “Hold” call on Felda Global Ventures Bhd (FGV) with a target price of RM4.40 as it does not expect any near-term re-rating catalyst due to its lacklustre earnings outlook, weak crude palm oil prices and stagnant fresh fruit bunches volume growth potential.
It said FGV has proposed to acquire 95% stake in PT Temila Agro Abadi (PT TAA) and PT Landak Bhakti Palma (PT LBP) for RM25.9mil (US$1,040/ha) and RM18.3mil (US$470/ha), respectively where they are expected to be completed by 4Q13.
It said PT TAA owns 8,193ha of oil palm land in Landak, West Kalimantan, of which 725ha are planted. PT LBP has 12,844ha of greenfield rubber plantation land in Sekadau, West Kalimantan.
“FGV plans to fully develop the lands within the next four years at an estimated total capex of US$98mil (RM310mil) which can be easily funded by its RM6.2bil cash pile.
“The proposed acquisitions will increase its Indonesian plantation land to 35,000ha (excluding joint venture land), which pale in comparison with its 343,000 ha land bank in Malaysia,” it said.
HwangDBS added it is neutral on the deals as they willnot address its muted earnings growth prospects in the near term, given the long gestation period for new planting.
“Also,it needs more sizeable mergers and acquisitions to grow earnings meaningfully, given its below-average production outlook for the next few years.
“Nevertheless, we understand FGV’s replanting program in Malaysia (15,000ha/year) is on track and it will achieve 3,000ha new planting in PT Citra Niaga Perkasa by mid-2014.
It said FGV has proposed to acquire 95% stake in PT Temila Agro Abadi (PT TAA) and PT Landak Bhakti Palma (PT LBP) for RM25.9mil (US$1,040/ha) and RM18.3mil (US$470/ha), respectively where they are expected to be completed by 4Q13.
It said PT TAA owns 8,193ha of oil palm land in Landak, West Kalimantan, of which 725ha are planted. PT LBP has 12,844ha of greenfield rubber plantation land in Sekadau, West Kalimantan.
“FGV plans to fully develop the lands within the next four years at an estimated total capex of US$98mil (RM310mil) which can be easily funded by its RM6.2bil cash pile.
“The proposed acquisitions will increase its Indonesian plantation land to 35,000ha (excluding joint venture land), which pale in comparison with its 343,000 ha land bank in Malaysia,” it said.
HwangDBS added it is neutral on the deals as they willnot address its muted earnings growth prospects in the near term, given the long gestation period for new planting.
“Also,it needs more sizeable mergers and acquisitions to grow earnings meaningfully, given its below-average production outlook for the next few years.
“Nevertheless, we understand FGV’s replanting program in Malaysia (15,000ha/year) is on track and it will achieve 3,000ha new planting in PT Citra Niaga Perkasa by mid-2014.