FGV disposal price of Canadian assets fair, says Maybank Research

KUALA LUMPUR: Maybank Investment Bank Research views Felda Global Ventures’ (FGV) disposal price of C$190mil (or RM608 mil) for its entire Canadian assets at 1.26 times historical PBV as fair.

“We view the non-core asset disposal positively as it reduces future losses from this division. A net gain on disposal of RM87mil is expected. Our EPS, TP and Hold call under review pending finalisation of our sector-wide CPO price review,” it said  on Friday.

FGV has signed a conditional sales and purchase agreement with Vitrerra Inc (a unit ofGlencore plc) to sell its 100%-equity stake in TRT-ETGO for a cash consideration of C$190mil subject to the adjustments under the terms of conditions pre-agreed.

TRT-ETGO operates an oilseed crushing facility and a food grade oil refinery in Becancour, Quebec, Canada. It also markets refined oil and related meal products in Canada and the North-eastern region of the US, and also sells crude degummed canola and soybean oil on an export basis. Expected completion date is by end-2015.

“We view the deal positively as TRT-ETGO has been in the red with net loss and comprehensive loss between 2012 and 2014 averaging C$38mil per annum (or RM122 mil). As a result, its NAV has declined 27% over the same period to C$148m as at 31 Dec 2014.

“Operationally, TRT-ETGO’s canola and soybean businesses are non-core to FGV which is focused on palm oil, rubber and sugar.

“The disposal of TRT-ETGO will help reduce FGV’s future losses from its downstream division; the cash proceeds will be redeployed to pare down borrowings and for working capital purposes,” said Maybank Research.