PETALING JAYA: The delisting risks of FGV Holdings Bhd will remain a concern among plantation analysts.
This is given its major shareholder Federal Land Development Authority’s (Felda) intention not to maintain the listing status of the planter.
According to CGS-CIMB Research, the odds of delisting FGV are high, given Felda’s stated intention.
“The share price of FGV could be supported by the potential privatisation offer by Felda and a 3% yield, ” it said in its latest report.
The research house is retaining a “hold” rating and target price (TP) of RM1.30 for FGV based on the previous mandatory takeover offer price from Felda.
Pending further action from Felda, Public Investment Bank (PIVB) Research in its latest note to clients is also maintaining a “neutral” call on FGV with an unchanged TP of RM1.56.
Despite rising crude palm oil (CPO) prices, FGV last Friday reported a net loss of RM35.42mil for the first quarter ended March 31,2021 (Q1) from a net profit of RM134.93mil in the immediate preceding quarter.
Quarterly revenue declined by 15.3% quarter-on-quarter to RM3.39bil from RM4.01bil.
On a year-on-year basis, the group’s quarterly net loss was significantly narrower compared with RM142.35mil.
PIVB Research pointed out that FGV’s Q1 results were significantly below expectations.
“Nevertheless, we think there will be a strong catch-up in the subsequent quarters given the CPO price momentum, ” it added.
PIVB Research also said the FGV management expects its fresh fruit bunch (FFB) production to grow by 2%-4% despite experiencing worsening worker shortage issues and tightening movement control orders.
The group has maintained its CPO production cost of RM1,500-RM1,600 per tonne for financial year 2021 (FY21). FGV has also hedged forward 20% of its full-year CPO sales at around the RM4,000-per-tonne level.
On replanting activities, the research house said FGV is targetting to replant 10,000ha-15,000ha, mainly in Sabah and the peninsular regions.
On the workers’ shortage issue, the group is currently short of 25% of the requirement, which could result in a significant drop in productivity when crops start picking up.
MIDF Research, which is neutral on FGV, said; “Moving forward, we anticipate that the favourable CPO price with a modest FFB production will generatea better financial performance for the group.”
In addition, the anticipated higher average selling price of refined sugar and increase in sales volume should be able to help FGV’s listed subsidiary, MSM Malaysia Holdings Bhd, achieve a higher profit margin in the coming quarters.
“Nonetheless, we reiterate our cautious stance given uncertainties shrouding FGV’s business positioning and operating model in view of the imminent termination of the land lease agreement and potential takeover of its mills by Felda.”
On the United States ban of imports of palm oil from FGV over allegations of forced labour, MIDF Research believes the group’s outlook will remain resilient, as FGV will revisit the appointment of an independent audit firm for an audit of operations within a reasonable period of time.
It will also continue to engage with the US Customs and Border Protection accordingly once an independent auditor has been appointed.