FGV beats expectations, analysts optimistic on prospects
KUCHING: FGV Holdings Bhd’s (FGV) third quarter of the financial year 2021 (3QFY21) net profit rose of RM399.39 million generally came above expectations.
Analysts are optimistic on its prospects as its fresh fruit bunches (FFB) are expected to improve on the back of the return of foreign workers for its plantation segment.
In the first nine months of FY21 (9MFY21), MIDF Amanah Investment Bank Bhd’s research team (MIDF Research) pointed out that the group’s FFB production was lower by 10 per cent year-on-year (y-o-y) to 2.9 million metric tonne (MT) from 3.2 million MT, showing a decline in output on the back of MCO related closure or shutdown and shortage of labour.
“We presume the group FFB production to recover in the coming quarters palm oil in Malaysia as the government has approved to bring in 32,000 foreign workers for the plantation sector,” it opined.
According to the research team at Public Investment Bank Bhd (PublicInvest Research), FGV, which is currently operating at 70 per cent workforce, expects the first batch of the 7,000 foreign workers that it plans to hire to arrive by the end-1Q22 due to stricter Covid-19 compliance.
It added that the impact on production would only be seen by 2Q22.
Meanwhile, it noted that the site assessments by Elevate, which is the independent auditor appointed to assess the group’s operations against the 11 international Labour Organisation indicators of forced labour, is expected to commence in the 1H22. Lastly, the upstream plantation has completed 7,573ha of felling and replanted 521ha as at 3QFY21, it added.
On its sugar segment, MIDF Research said its sugar segment under MSM Malaysia Holding recorded higher earnings of RM122 million (more than 100 per cent increase y-o-y) from RM36 decline in 9MFY20 which was mainly due to improved average selling price and gains on liquidation of excess raw sugar hedges.
“Going forward, we opine that with an increasing utilisation rate at MSM Johor via Planned Improvement Programme, FGV could see a gradual recovery from its sugar segment in FY21,” it said.
Overall, MIDF Research revised its FY21 forecast on the group upwards to RM655 million due to better performance for its plantation segment.
For FY22F however, the upward revision in base earnings is more than offset by impact of the Cukai Makmur, resulting in a lower net profit forecast of RM304 million, it said.