FGVH potential entry into PNG gets positive review

PETALING JAYA: Felda Global Ventures Holdings Bhd’s (FGVH’s) potential foray into Papua New Guinea (PNG) is positive news because investors have been waiting for the company to put its money to use, analysts said.

A bank-based research analyst said the price had to be reasonable and FGVH also needed to carry out its due diligence properly.

On a longer-term basis, the move into PNG would contribute to growing FGVH’s asset base, which would eventually contribute to its earnings, the analyst said.

As at financial year ended Dec 31, 2012 FGVH has RM5.673bil in cash and near-cash items.

“FGVH needs to put its money to work so there won’t be a drag on return on equity,” the analyst said.

The news does not come as a surprise as FGVH has made it known that it is on the lookout to acquire more land. It is also looking into plantation ventures in Myanmar, Cambodia and Mindanao in the Philippines.

If FGVH does enter PNG, it would be the third Malaysian plantation company to foray into the country after Kuala Lumpur Kepong Bhd (KLK) and Kulim (M) Bhd.

CIMB Research analyst Ivy Ng, however, is neutral on the news as she said it was still in its preliminary stages, and as there were no further details on its acquisition and plans there. However, she added that it did not come as a surprise, given that KLK and Kulim had already ventured there.

PublicInvest Research analyst Chong Hoe Leong said FGVH would probably have to spend a lot in capital expenditure as PNG still lacked major infrastructure development.

A daily reported FGVH president and group chief executive officer Datuk Sabri Ahmad as saying that the group was now conducting feasibility studies and technical due diligence, with the possibility of starting with 10,000ha.

Sabri said PNG government officials were impressed with the FGVH model and had invited FGVH to adopt its model to start oil palm plantations there.

The FGVH model encompasses land owners providing the landbank, while FGVH would be the estate manager in running the plantation business.

Meanwhile, FGVH is in its final stage of due diligence with a local partner to start rubber processing activities in the south of Myanmar. It will buy natural rubber from local farmers and turn it into processed rubber. If the deal is successful, FGVH may later buy 12,000ha.

Last December, FGVH signed a memorandum of understanding with Myanmar’s Pho La Min Trading Ltd to venture into the rubber business in three phases, starting with a processing plant.

“In Indonesia, it is in the final stage of a due diligence to plant 10,000ha out of its 14,700ha,” Chong said.

Kulim has a 48.97% stake in PNG-based palm oil maker New Britain Palm Oil Ltd.

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