Positive on FGV’s outlook as management free to work without political involvement
KUCHING: Felda Global Ventures Holdings Bhd’s (FGV) long term outlook has garnered positive views from analysts as FGV’s priorities are well defined with management free to manage the company without political involvement.
The research arm of MIDF Amanah Investment Bank Bhd (MIDF Research) recently met up with FGV and returned feeling positive on the company’s long term outlook.
“During the meeting, we gathered that FGV will remain focused on its Strategic Plan with four Strategic Thrusts (Operational Excellence, Moving Down Value Chain, Growth Through Portfolio Balancing and Optimise Financial And Human Capital),” MIDF Research said.
According to MIDF Research, for the financial year 2018 (FY18), some of the key priorities are 4.85 million tonnes of fresh fruit bunch (FFB) production, crude palm oil (CPO) production cost of RM1,562 per tonne, replanting target of 15,000 hectares (ha) and commence operation of Johor sugar refinery by mid-2018.
“Most importantly, we believe that the management will be free to manage the company without political influence.
“According to New Straits Times, FGV president and chief executive officer ( CEO) Datuk Zakaria Arshad said that ‘GLCs like FGV would be free to act accordingly without political involvement’ after a meeting with the Council of Eminent Persons at Ilham Tower.”
MIDF Research recalled that FGV achieved FFB production of 0.99 million tonnes in the first quarter of FY18 (1QFY18) or 20 per cent of full year target of 4.85 million tonnes.
The research arm noted that against 1QFY17, this represents an improvement of 23 per cent year on year (y-o-y) as FGV estates improve its operation.
Overall, MIDF Research believed that FGV is on track to achieve the group’s FY18 FFB volume.
“Note that 1Q is seasonally the low production quarter at industry level with Malaysia 1Q production makes up only 20 per cent of full year production in 2017.”
MIDF Research went on to note that the CPO production cost of RM1,728 per tonne in 1Q18 was higher than the full year target of RM1,562 per tonne as more agricultural input such as manuring had been brought forward into 1Q.
Hence, the research arm believed that the cost should reduce from 2Q onwards.
Meanwhile, based on the 5,100 ha of felling which had been completed in 1Q18, MIDF Research expected little risk in FGV’s target of 15,000 ha of replanting this year.
“For the sugar segment, FGV mentioned that its Johor sugar refinery is now 94 per cent completed.
“The official commencement start in July and this will effectively add its total capacity by 0.3 million tonnes for domestic and export growth.”