MARKET DEVELOPMENT
Pontian Acquisition to Boost FGV’s Crude Palm Oil Output
Pontian Acquisition to Boost FGV’s Crude Palm Oil Output
03/10/2013 (Borneo Post) - Felda Global Ventures Holdings Bhd’s (FGV) acquisition of Pontian United Plantations Bhd’s (Pontian) 100 per cent equity stake is expected to boost its crude palm oil (CPO) output.
The research arm of Kenanga Investment Bank Bhd (Kenanga Research) in a report said the acquistion of Pontian by FGV will result in higher CPO output by 80,000 metric tonnes (MT) for FGV.
Kenanga Research analyst Alan Lim Seong Chun added, “We estimate that the acquisition should boost FGV’s financial year 2014 CPO output by 6 per cent to 1.38 million MT.
“We think the valuation of the deal at RM74,794 per hectare is fair as it is comparable to the valuation of RM75,000 to RM80,000 per hectare for matured Sabah plantation estate,” he said.
Nevertheless, he added that higher transportation cost in view of the recent hike in petrol and diesel prices would marginally nibble into the earnings of FGV.
Hence, he tweaked the earnings of FGV for financial year 2014 for a small upward adjustment.
He estimated that FGV’s financial year 2014 core earning is projected to go up by two per cent to RM890 million after asssuming higher CPO volume and higher CPO production cost.
As for financial year 2013, Lim maintained FGV’s core earning at RM605 million as the impact of the acquisition should only be felt after the fourth quarter of 2013.
At the same time, he raised the target price for FGV’s share price by two per cent to RM4.55 based on forward price-to-earnings of 18.7 times.
Kenanga Research remains upbeat about FGV’s prospects with the company in net cash position while low CPO prices are likely to keep the upside movement of FGV’s share price to be limited.
Earlier on in July, FGV had proposed to acquire all Pontian shares for a total cash of RM1.21 billion.
The acquisition is based on the price of RM140 per share and 8.65 million Pontian shares.
Meanwhile, Kenanga Research noted that FGV’s acquisition of Pontian will create value and synergies for the company for the long run.
The research arm of Kenanga Investment Bank Bhd (Kenanga Research) in a report said the acquistion of Pontian by FGV will result in higher CPO output by 80,000 metric tonnes (MT) for FGV.
Kenanga Research analyst Alan Lim Seong Chun added, “We estimate that the acquisition should boost FGV’s financial year 2014 CPO output by 6 per cent to 1.38 million MT.
“We think the valuation of the deal at RM74,794 per hectare is fair as it is comparable to the valuation of RM75,000 to RM80,000 per hectare for matured Sabah plantation estate,” he said.
Nevertheless, he added that higher transportation cost in view of the recent hike in petrol and diesel prices would marginally nibble into the earnings of FGV.
Hence, he tweaked the earnings of FGV for financial year 2014 for a small upward adjustment.
He estimated that FGV’s financial year 2014 core earning is projected to go up by two per cent to RM890 million after asssuming higher CPO volume and higher CPO production cost.
As for financial year 2013, Lim maintained FGV’s core earning at RM605 million as the impact of the acquisition should only be felt after the fourth quarter of 2013.
At the same time, he raised the target price for FGV’s share price by two per cent to RM4.55 based on forward price-to-earnings of 18.7 times.
Kenanga Research remains upbeat about FGV’s prospects with the company in net cash position while low CPO prices are likely to keep the upside movement of FGV’s share price to be limited.
Earlier on in July, FGV had proposed to acquire all Pontian shares for a total cash of RM1.21 billion.
The acquisition is based on the price of RM140 per share and 8.65 million Pontian shares.
Meanwhile, Kenanga Research noted that FGV’s acquisition of Pontian will create value and synergies for the company for the long run.