MARKET DEVELOPMENT
Unfair To Compare FGV With Diversified Conglomerates, Says Isa
Unfair To Compare FGV With Diversified Conglomerates, Says Isa
07/11/2014 (Bernama) - Felda Global Ventures Holdings chairman Tan Sri Mohd Isa Abdul Samad says it is not fair to compare the company's performance with other companies for which plantations are only one of their core businesses.
"We are purely a plantation company. We are not a conglomerate that diversifies our businesses," Mohd Isa told Bernama and TV3 on the sidelines of the 10th World Islamic Economic Forum in Dubai.
"Only 30 per cent of our revenue is from a non-plantation business and it is a downstream business. The rest is from our plantations," he said.
Mohd Isa was responding to accusations by some quarters that FGV's performance "was by far the worst among all the plantation companies on the stock exchange."
FGV's shares closed at RM3.50, rising two sen after moving between RM3.42 and RM3.56 throughout the session on Thursday.
While putting FGV's target price at RM4 a share, closer to its offer price of RM4.55, conglomerate Sime Darby is still Kenanga Research's top pick, not due to any development in Sime Darby's plantation unit but due to the listing of its motor unit set for the first half of 2015.
"We like Sime Darby as we think its valuation should rerate higher due to a potential spin-off exercise within Sime Darby's business divisions," it said.
Including FGV, Kenanga Research has put nine plantation stocks under its coverage as 'market perform', which means a particular stock's expected total return is within the range of three per cent to 10 per cent.
Sime Darby however is recommended as 'outperform' with Genting Plantations as 'underperform'.
Parliament was told recently that the decline in FGV's share price was due to the drop in global crude palm oil (CPO) prices from about RM3,000 per tonne in June 2012 to RM2,200 per tonne currently.
Mohd Isa said other plantation-related companies were also affected by the lower CPO prices although their other core businesses helped cushion the impact.
However, FGV still posted a higher revenue of RM7.810 billion in the first half financial year ended June 30, 2014 from a revenue of RM5.674 billion in the same period last year.
According to Mohd Isa, in the event of lower CPO prices, it is good that FGV is now embarking on replanting activities while actively acquiring 'green' and 'brown' fields.
Pontian United Plantations Bhd (PUP), the first subsidiary acquired after FGV's listing, is expected to contribute 20 per cent to the group's profit for the financial year ending Dec 31, 2014.
The acquisition of PUP in October was one of FGV's best deals last year, when FGV is said to have paid about RM34,000 per acre (0.4047 hectare) at a time when the market price was RM55,000 per acre.
In August this year, FGV acquired Singapore-incorporated plantation company Asian Plantations Ltd (APL) for RM628 million.
Listed on the Alternative Investment Market of the London Stock Exchange, APL owns 24,622 hectares of oil palm plantations via five wholly-owned estates in Miri and Bintulu, Sarawak.
With this acquisition, FGV is now the world's third largest plantation operator by hectarage with a total of more than 450,000 hectares in Malaysia and Indonesia.
The group is also the largest CPO producer in the world with about 18 per cent of Malaysia's production and seven per cent of the world's production.
At this year's Palm Oil Trade Fair and Seminar recently, leading analyst Dorab Mistry predicted that CPO prices should gradually increase to RM2,500 per tonne by March 2015, saying he believed CPO demand is likely to stay strong due to the food segment while production is likely to be affected by the dry season.
"We are purely a plantation company. We are not a conglomerate that diversifies our businesses," Mohd Isa told Bernama and TV3 on the sidelines of the 10th World Islamic Economic Forum in Dubai.
"Only 30 per cent of our revenue is from a non-plantation business and it is a downstream business. The rest is from our plantations," he said.
Mohd Isa was responding to accusations by some quarters that FGV's performance "was by far the worst among all the plantation companies on the stock exchange."
FGV's shares closed at RM3.50, rising two sen after moving between RM3.42 and RM3.56 throughout the session on Thursday.
While putting FGV's target price at RM4 a share, closer to its offer price of RM4.55, conglomerate Sime Darby is still Kenanga Research's top pick, not due to any development in Sime Darby's plantation unit but due to the listing of its motor unit set for the first half of 2015.
"We like Sime Darby as we think its valuation should rerate higher due to a potential spin-off exercise within Sime Darby's business divisions," it said.
Including FGV, Kenanga Research has put nine plantation stocks under its coverage as 'market perform', which means a particular stock's expected total return is within the range of three per cent to 10 per cent.
Sime Darby however is recommended as 'outperform' with Genting Plantations as 'underperform'.
Parliament was told recently that the decline in FGV's share price was due to the drop in global crude palm oil (CPO) prices from about RM3,000 per tonne in June 2012 to RM2,200 per tonne currently.
Mohd Isa said other plantation-related companies were also affected by the lower CPO prices although their other core businesses helped cushion the impact.
However, FGV still posted a higher revenue of RM7.810 billion in the first half financial year ended June 30, 2014 from a revenue of RM5.674 billion in the same period last year.
According to Mohd Isa, in the event of lower CPO prices, it is good that FGV is now embarking on replanting activities while actively acquiring 'green' and 'brown' fields.
Pontian United Plantations Bhd (PUP), the first subsidiary acquired after FGV's listing, is expected to contribute 20 per cent to the group's profit for the financial year ending Dec 31, 2014.
The acquisition of PUP in October was one of FGV's best deals last year, when FGV is said to have paid about RM34,000 per acre (0.4047 hectare) at a time when the market price was RM55,000 per acre.
In August this year, FGV acquired Singapore-incorporated plantation company Asian Plantations Ltd (APL) for RM628 million.
Listed on the Alternative Investment Market of the London Stock Exchange, APL owns 24,622 hectares of oil palm plantations via five wholly-owned estates in Miri and Bintulu, Sarawak.
With this acquisition, FGV is now the world's third largest plantation operator by hectarage with a total of more than 450,000 hectares in Malaysia and Indonesia.
The group is also the largest CPO producer in the world with about 18 per cent of Malaysia's production and seven per cent of the world's production.
At this year's Palm Oil Trade Fair and Seminar recently, leading analyst Dorab Mistry predicted that CPO prices should gradually increase to RM2,500 per tonne by March 2015, saying he believed CPO demand is likely to stay strong due to the food segment while production is likely to be affected by the dry season.