MARKET DEVELOPMENT
Mixed Response From Research Houses On FGV\'s Proposed Acquisition Of Pontian
Mixed Response From Research Houses On FGV\'s Proposed Acquisition Of Pontian
20/07/2013 (Bernama) - Felda Global Ventures' (FGV) proposed acquisition of the Sabah plantation company, Pontian United Plantations' shares for RM1.21 billion, has received mixed response from research houses in the country.
Kenanga Research is positive on the proposed acquisition as it may increase FGV's 2014 earnings by six per cent to RM950 million as well as amplify its efficiency due to expected overall increase in fresh fruit bunches per hectare.
"We gather that the offer is conditional as it will be valid if FGV received more than 50 per cent of Pontian's shares.
"As of yesterday, FGV has obtained irrevocable undertakings from multiple Pontian shareholders amounting to a 23.81 per cent stake," it said, maintaining its "market perform" call on the stock, with an unchanged RM4.60 target price.
While Kenanga Research was positive on the proposed acquisition, Alliance Research and RHB Research were both neutral to the announcement.
Pontian has 40,000 hectares of oil palm plantation land in Sabah, which will increase FGV's hectarage by a fairly significant 11 per cent.
However, Alliance Research said if Pontian's 2012 financial year net profit of RM39.5 million was repeated in the 2013 financial year, it would make up only six per cent of group earnings.
"We are neutral on the acquisition as we find initial valuation to be expensive. We maintain our "sell" recommendation on FGV with a RM3.43 target price," it added.
Meanwhile, RHB Research acknowledged that FGV was under pressure to put its net cash hoard of RM5.8 billion as at end of first quarter 2013 to good use.
"FGV is in dire need to acquire assets which will be immediately earnings accretive and this acquisition could potentially add 2 to 2.5 per cent per annum to its bottomline," it added.
RHB Research maintained its neutral call on the stock with an unchanged target price of RM4.34.
Kenanga Research is positive on the proposed acquisition as it may increase FGV's 2014 earnings by six per cent to RM950 million as well as amplify its efficiency due to expected overall increase in fresh fruit bunches per hectare.
"We gather that the offer is conditional as it will be valid if FGV received more than 50 per cent of Pontian's shares.
"As of yesterday, FGV has obtained irrevocable undertakings from multiple Pontian shareholders amounting to a 23.81 per cent stake," it said, maintaining its "market perform" call on the stock, with an unchanged RM4.60 target price.
While Kenanga Research was positive on the proposed acquisition, Alliance Research and RHB Research were both neutral to the announcement.
Pontian has 40,000 hectares of oil palm plantation land in Sabah, which will increase FGV's hectarage by a fairly significant 11 per cent.
However, Alliance Research said if Pontian's 2012 financial year net profit of RM39.5 million was repeated in the 2013 financial year, it would make up only six per cent of group earnings.
"We are neutral on the acquisition as we find initial valuation to be expensive. We maintain our "sell" recommendation on FGV with a RM3.43 target price," it added.
Meanwhile, RHB Research acknowledged that FGV was under pressure to put its net cash hoard of RM5.8 billion as at end of first quarter 2013 to good use.
"FGV is in dire need to acquire assets which will be immediately earnings accretive and this acquisition could potentially add 2 to 2.5 per cent per annum to its bottomline," it added.
RHB Research maintained its neutral call on the stock with an unchanged target price of RM4.34.