Sugar hike to boost FGV’s earnings slightly

KUALA LUMPUR: Felda Global Ventures Holdings Bhd (FGV), which has a 51 per cent stake in sugar company MSM Malaysia Holdings Bhd (MSM), is expected to see a slight uptick in its earnings from the recently announced increase in wholesale and retail sugar price.

As such, analysts pegged a ‘neutral’ view on the price hike as the increment has a minor impact on the company.

In a report, the research arm MIDF Amanah Investment Bank Bhd (MIDF Research) said, “We are neutral on the news as the impact on earnings is limited at two per cent.”

Of note, the Ministry of Domestic Trade, Cooperatives and Consumerism (MDTCC) issued a federal gazette on the enforcement of the Price Control and Anti-Profiteering (Determination of Maximum Price) (No.2) Order 2017.

The new regulation dictates that the ceiling price of refined sugar would increase as much as 11sen/kg effective from March 1, 2017.

MIDF Research noted that currently, the wholesale and retail ceiling price of coarse grain white refined sugar for the states in Peninsular Malaysia for instance, is of RM2.87 per kg (previously RM2.76 per kg) and RM2.95 per kg (previously RM2.84 per kg) respectively, which represent approximately four per cent increases in the price of refined sugar.

As such, it said, it increased its FGV financial year 2017 (FY17) and FY18 core net profit forecasts by two per cent each to RM113 million and RM116 million, respectively. This was in line with MSM net profit forecast which has been increased by two per cent.