The Edge Markets (02/04/2018) - KUALA LUMPUR (April 2): Felda Global Ventures Holdings Bhd (FGV)'s share price could be re-rated following a successful execution of its plans to raise yields as well as cost and capital allocation optimisation, according to CIMB Research.

In a note this morning, CIMB research analyst Ivy Ng said with reference to an article published by The Edge Malaysia that FGV's share price could re-rate on the back of improved core net profit if FGV is able to successfully execute its plans to raise fresh fruit bunches (FFB) yields, reduce operating costs and optimise capital allocations.

"We are positive on FGV's plans to improve its performance. However, this is partly offset by concerns of lower crude palm oil (CPO) prices in 2018," said Ng.

She cautioned that despite FGV showing a 28% year-on-year (y-o-y) improvement in FFB output in the first two months of 2018, average CPO prices fell 23% y-o-y in the same period.

The research house therefore reiterates its 'hold' rating on FGV with an unchanged target price of RM2.12.

In a recent interview, FGV chairman Datuk Azhar Abdul Hamid told The Edge Malaysia that the group is expecting to see results from its improvement initiatives by end of this year or early next year.

The group said it has been examining the quality of its assets, and indicated that it is adding about 8,000 workers to the group by end of the month.

Azhar also revealed that it is negotiating to sell two non-core businesses, and is evaluating mergers and acquisitions (M&A) proposals which may include acquiring plantation assets.

As for its 51%-owned MSM Malaysia Holdings Bhd, the group revealed that it may grow and participate in the export market.

Separately, FGV said its 72%-owned subsidiary Delima Oil Products Sdn Bhd has commenced legal proceedings against Safitex Trading LLC in Dubai and is seeking US$11.7 million (RM45.2 million) from Safitex General Trading LLC as the amount owed.

A favourable outcome to this case will allow the group to reverse the earlier impairment made while an unfavourable outcome will result in further losses to the group. The recoverable amount works out to around 1.2 sen per FGV share, said CIMB.

At 11.44am, FGV was traded unchanged at RM1.70 with 729,700 shares done.

Read more at http://www.theedgemarkets.com/article/fgvs-share-price-may-be-rerated-improvement-initiatives-%E2%80%94-cimb