KUALA LUMPUR: Felda Global Ventures Holdings Bhd's plantation division earnings are expected to continue growing in 2018-20E on the back of rising fresh fruit bunch (FFB) and crude palm oil (CPO) production, said Affin Hwang Capital Research.
The research house maintained its buy call on FGV and target price of RM2.26 based on an unchanged 25x price-earnings on its 2018E core earnings per share.
It said the rising prime-matured palm-tree areas and lower production costs are expected to offset the dip in CPO prices.
"We expect FGV to be on track to achieve an ideal palm-tree age profile of 12-13 years by 2020 through an annual replanting programme of about 3-6% of its planted landbank," said the research firm in its Wednesday report.
"Based on our sensitivity analysis, a RM50-150/MT move in CPO prices could affect core EPS by 10-33% in FY18-20E. A swing in FFB yields by 0.25-1.0MT/ha would impact 2018-20E core EPS by 2-11%, while a change in the oil-extraction rate (OER) of 0.25-1.0% would affect core EPS by 2-9%."
Meanwhile, Affin Hwang Research said it expects subsidiary MSM Malaysia Holdings to generate better earnings in 2018E from fabourable raw materials costs and stronger ringgit, though it said there could be some downside risk from the new refinery.
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