Analyst: Strong finish for FGV’s FY20
KUALA LUMPUR: FGV Holdings Bhd’s (FGV) posted normalised earnings of RM130.9 million for its fourth quarter of financial year 2020 (4QFY20) which represents a drop by 45.6 per cent year on year (y-o-y)as compared to RM89.9 million in 4QFY19.
However, cumulatively, FY20 results turned positive at RM149.9 million thanks to higher crude palm oil (CPO) price, improvement in profit in logistic and ‘others’ sector, and lower losses registered in sugar sector.
To note, the improvement was on the back of higher margin as a result of higher average CPO price realised of RM2,675 per metric tonne (MT) as compared to RM2,021 per MT recorded in the previous financial year.
“This came in above our and consensus’s expectation of the FY20 earnings forecasts, accounting for more than 100 per cent for both on the back of be er-than-expected performance of the plantation sector,” said analysts with MIDF Amanah Investment Bank Bhd (MIDF Research) yesterday.
“Looking ahead, we foresee a be er FY21 financial performance driven by 2 factors namely elevated CPO prices, and narrowing losses from its sugar segment.
“In 4QFY20, the group’s FFB production slightly higher by +3.0 per cent yoy to 1.04m mt, showing continued recovery in output during the seasonally peak production cycle.
“Nonetheless, FY20 FFB
This came in above our and consensus’s expectation of the FY20 earnings forecasts, accounting for more than 100 per cent for both on the back of be er-than-expected performance of the plantation sector. MIDF Research
production still came in lower at 4.29m mt (-3.6per cent yoy) which was mainly led by the significant reduction in 1QFY20 FFB production (-33.0 per cent yoy).
“This was due to the impact of dry weather conditions in FY19, especially in Sabah where a third of FGV’s estates are situated as well as lower application of fertiliser. We presume the group 1QFY21 FFB production to remain flattish in view of labour shortage and La Nina weather disrupting operations.”
Based on Bursa announcement dated February 26, 2021, the group has extended the closing date for the acceptance of the takeover offer to March 15, 2021. To recap, the original deadline was on February 2, 2021, which was then postponed to February 16, 2021, and subsequently to March 2.
Through Maybank, Felda has made an unconditional mandatory takeover offer to acquire all remaining shares in FGV for RM1.30 per share.
“We opine that the possibility of a takeover of FGV’s mills by Felda will potentially effect FGV’s business prospects although such scenario is premature at this juncture,” it added.
“The group’s FY20 results have been encouraging as it returned to profitability, mainly on the back of higher CPO prices and better performance from sugar segment. Going ahead, we anticipate that the favourable CPO price with a modest FFB production to generate a better financial performance for the group.
“Nonetheless, we reiterate our cautious stance on the much uncertainties shrouding the group’s business positioning and operating model in view of the imminent termination of LLA and potential takeover of its mills.
“Despite the US banned imports of palm oil from FGV over allegations of forced labour, we believe that the group’s outlook will remain resilient given that FGV will revisit the appointment of an independent audit firm for an audit of operations within a reasonable period of time and will continue to engage with the CBP accordingly once an independent auditor has been appointed.”