Flash Back: Datuk Zakaria Arshad, from the company’s downstream segment previously, had been appointed its new chief executive officer (CEO) effective April 1.

18/04/2016 (The Star) - Felda Global Ventures Holdings Bhd’s (FGV) actions to call off its proposed acquisition of a 55% stake in China-based edible oil producer Zhong Ling Nutril-Oil Holdings Ltd may revive interest in the stock once again.

The stock, trading at a -0.8 standard deviation from its peers, could play catch up as negative uncertainties surrounding it before have now been resolved.

However, there has been muted reaction from investors so far despite the announcement more than a week ago.

“The announcement officially marks the worst being over for this company. We think there could be chances for upside ahead. I don’t think the implications following this news has been fully appreciated by the market yet,” a dealer said.

Notably the abortion of the RM976.25mil acquisition into Zhong Ling Nutril-Oil came after a change in the top management at FGV.

The abortion was initiated by FGV which sent termination notices to Zhong Hai Investment Holdings Ltd and the other vendors, on April 8.

It said that the conditions precedent set out in the two conditional sale and purchase agreements could not be fulfilled within the stipulated time, nor have they been waived.

Datuk Zakaria Arshad, from the company’s downstream segment previously, had been appointed its new chief executive officer (CEO) effective April 1.

In a report published before the deal was aborted, CIMB Research said it had reservations over the deal to buy into Zhong Ling Nutril-Oil because of the question of the sustainability of earnings following the then planned acquisition.

CIMB said that this is due to rising competition in the cooking oil market in China and slowing demand for palm oil from China .

The research house noted that FGV’s historical track record in overseas downstream ventures ‘has not been great’ and adding that there was a lack of immediate synergies from the acquisition of these assets.

After the deal was called off, CIMB Research said it was positive on the development noting concerns that the acquisition would have diluted the future earnings of FGV.

“Also, FGV’s historical track record in overseas downstream ventures has not been too good, and we see a lack of synergy from the assets,” its analyst Ivy Ng said in the report.

“We are encouraged by the decisive action of the new CEO to abort this deal in view of the group’s challenging business outlook. This could suggest the group may focus on improving efficiency and profitability of its existing plantation and downstream assets, instead of pursuing mergers and acquisitions,” Ng said.

A technical analyst noted that after a strong break to the upside two months ago, the stock has been sitting in a tight trading range between RM1.45 to RM1.50 in the past month or so.

While it has become a familiar brandname at home, FGV is the world’s largest producer of crude palm oil with operations in more than 10 countries in the continents of Asia, North America and Europe.