Management change at FGV?

Ismee is expected to replace FGV group president and CEO Dr Mohammed Emir Mavani Abdullah whose contract ends in July.

Ismee is expected to replace FGV group president and CEO Dr Mohammed Emir Mavani Abdullah whose contract ends in July.

Ismee Ismail expected to helm palm oil company

Felda Global Ventures Holdings Bhd (FGV), whose market capitalisation is now almost half of what it was at its initial public offering (IPO) in 2012, is poised for a change in its top leadership.

Tan Sri Ismee Ismail is expected to replace FGV’s current group president and CEO Dr Mohammed Emir Mavani Abdullah, whose contract comes to an end this July.

Ismee, the managing director and CEO of Lembaga Tabung Haji (LTH), a position he has held for the last eight years, is speculated to be leaving the pilgrim fund and that the fund will be headed by Datuk Johan Abdullah.

According to LTH’s website, Johan was appointed as LTH deputy group managing director and CEO on January 15 this year.

LTH is the second largest shareholder in FGV, having about 7.78% stake after Federal Land Development Authority (Felda), which has a 34% stake in FGV.

Emir was appointed to his position in July 15, 2013 under a two-year contract with an option to extend another year.

According to sources, Ismee, who is also on the board of director of TH Plantations Bhd , is expected to join the FGV this year.

Notably, Ismee was previously speculated to helm Permodalan Nasional Bhd (PNB). However, PNB’s top position is now said to be going to an internal candidate in the form of Datuk Idris Kechot.

Bumpy ride

Notably, FGV’s share price has not been performing well since its listing due to lofty valuations and the profile of its its trees which are aging and thus less productive.

After closing as high as RM5.50, FGV has been trending downward ever since.

Its share price has been under selling pressure since last year and traded at its lowest level since listing on the main board of Bursa Malaysia at RM2.10 on Jan 7 this year, which is half its IPO price of RM4.55.

“Slump in its share price may cause the group to be removed from the FBM KLCI index,” says CIMB Research plantation analyst Ivy Ng in a recent report.

The fall in FGV share price accelerated after the group announced its desire to acquire Asian Plantations Ltd. Not helping was FGV’s quarterly loss for its third quarter ended Sept 30, 2014 and softening crude palm oil (CPO) prices.

FGV’s major shareholders, namely are Kumpulan Wang Persaraan (KWAP) and Employees Provident Fund (EPF), have also been selling their stakes since last year.

According to PublicInvest Research, KWAP and EPF sold down their stake in FGV last year and now own 6% and 5.7% respectively.

Nonetheless, the selling pressure has somewhat subsided as KWAP and EPF have started buying more shares recently, it adds.

“We think that the potential upside seems limited at the current level, hence our downgrade to a neutral from buy with an unchanged target price of RM2.70,” it says in report.

Yesterday, FGV saw a slight rebound in its share prices of about 1.16% to close at RM2.62 a share, giving it a market capitalisation of RM9bil.

At its current price, the counter is trading at a price-to-earnings (PE) of 11.9 times, Bloomberg data showed.

In a recent report by TA Securities, it says that FGV is trading below the historical means both in its PE and price-to-book value (P/BV).

“But this is because the stock has been trading at a premium previously.

“That premium would have diminished on under-delivery on earnings,” it says.

Out of a Bloomberg poll of 17 analysts, two have “buy” calls on the plantation giant, nine rated the stock a “hold” and six placed a “sell” call on it.

Consensus rating was at RM2.53 a share, while its 12-month forward target price at RM2.86.

Analysts are expecting FGV to pay a lower dividend for its FY14 especially on the back of softening CPO prices and to maintain its replanting programme.

“FGV’s earnings are highly sensitive to CPO price, a RM100 per tonne change will impact earnings per share by 13%,” says TA Securities.

Ng expects that FGV would have a dividend payment of about eight sen for FY14, which would works out to a dividend yield of 3.6%.

“We are projecting a dividend payout of 98% for FY14. For FY15 and FY16, we expect the group to pay out 75% to 85% of its earnings, translating to dividend yields of 4% to 5%,” she says.

FGV has a dividend policy of distributing at least 50% of its net profit as dividends for shareholders.

In FY13, the group paid a total of 16 sen per share after paying a 14 sen a share in FY12, which works about 5% to 7% of dividend yields.

Ng has revised down her earnings estimates on FGV by 4% to 7% to reflect the production losses from the floods and some losses from Asian Plantations.

PublicInvest expects that FGV’s fourth quarter of its FY14 results to be “less encouraging”, due to weaker CPO prices, continuous struggling in downstream activities, an estimated loss of RM21mil from the impact of the East Coast floods and lower FFB productions.

For the first half of this year, Ng notes that FGV would be focusing to divest some of its non-core businesses, which include the travel, IT and engineering businesses, which potentially worth RM320mil.

“This will allow the group to receive some proceeds to strengthen its balance sheet but they are unlikely to boost the earnings of the group significantly.

“We view this positively as it will allow the group to better focus on its existing core businesses,” she adds.

She indicates that FGV may need to borrow or raise equity to fund any significant future acquisitions.

“We believe investors will be monitoring closely on whether the group has been able to add value to its shareholders through its past acquisitions in its upcoming results,” she says.

Oil & Gas , Palm Oil , FGV , shareholders , lth , oil palm , palm oil