Neutral on FGV’s near-term prospects
KUCHING: Analysts are feeling neutral on FGV Holdings Bhd’s ( FGV) near term prospect, given the group’s low crude palm oil ( CPO) price and turnaround strategy.
The research arm of MIDF Amanah Investment Bank Bhd ( MIDF Research) were left feeling neutral on FGV’s prospects following the group’s recent analyst briefing.
“This is due to low CPO price and its turnaround strategy may take time to see results,” MIDF Research said.
According to MIDF Research, FGV’s plantation division set a new fresh fruit bunch (FFB) volume target of 4.65 million tonnes.
“This is slightly lower than the previous target of 4.85 million tonnes. Effectively, the FFB growth target is now lowered to nine per cent, from 13 per cent.”
MIDF Research arm noted that other targets for financial year 2018 ( FY18) included an oil extraction rate of 20.5 per cent, CPO production of three million tonnes and CPO production cost of RM1,600 per tonne.
The research arm recalled that in the second quarter of FY18 (2QFY18), FGV plantation division was in loss before tax and zakat of RM6 million, against 1QFY18 profit before zakat and tax of RM18 million.
MIDF Research also noted on FGV recently recording better earnings from the group’s sugar and logistics support business.
“Sugar segment turned profitable due to lower raw sugar cost and strengthen ringgit.
“Logistics and support business sector earnings also improved due to higher tonnage carried.”
On forecasts for FGV, MIDF Research maintained its assumption of core net loss of RM72.7 million for FY18.
“Things should improve in FY19 with expected FFB volume recovery. The information gathered during the briefing has been factored in.”
The research arm also maintained its ‘ neutral’ rating and target price of RM1.54 per share, based on price to book of one-fold.
It said that despite the weak earnings prospect, the share price is trading at below book value of RM1.54 hence suggesting limited downside.