Mixed outlook for FGV for the year ahead

KUCHING: Following weakerthanexpected results for its first half of financial year 2018 (1HFY18), analysts have pegged mixed outlook for FGV Holdings Bhd (FGV) in FY18.

The research arm of Kenanga Investment Bank Bhd (Kenanga Research) trimmed its FY18-19E core net profit by 46-29 per cent to RM35-79 million, from RM64111 million previously, as the research arm updated its unit cost expectations, on lower core net profit margins to 0.2-0.4 per cent (from 0.5-0.6 per cent) in FY18-19.

Kenanga Research expected the fertiliser program to be completed by the third quarter of 2018 (3Q18), translating to lower cost in 4Q18 and better earnings upside for 2H18.

On another note, the research arm maintained its FY18 fresh fruit bunch (FFB) production target of 4.6 million metric tonnes (MT) (up eight per cent) which it believed is conservative versus management’s target of 4.85 million MT (up 14 per cent).

“As the group’s trading operations switched over to commission basis, we expect much lower earnings volatility from the logistics sub-segment, while sugar segment should see gradual improvement on lower raw sugar prices.

“However, the unexciting crude palm oil ( CPO) price outlook, high production cost versus other planters, and additional cost of a proposed Mutual Separation Scheme (MSS) in 2H18 remains the main drag on earnings,” the research arm said.