FGV share price to recover in Q1 2013

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FGV share price to recover in Q1 2013

FGV share price to recover in Q1 2013

Saturday, December 1, 2012
  • Felda
FGV's lower pre-tax profit of RM900 mllion is due to lower CPO prices

KUALA LUMPUR: The share price of Felda Global Ventures Holdings Bhd (FGV), which is currently trading at slightly higher than the offer price, is expected to recover in the first quarter of 2013, said Group President/Chief Executive Officer Datuk Sabri Ahmad.

 

He said similar to most plantation companies, FGV has also been impacted by the correction in palm oil prices.

 

Speaking at a media briefing today, Sabri said the government's announcement on the revision of crude palm oil (CPO) export tax and duty free, is also expected to play a significant role in enhancing FGV's earnings, which will reflect in better share prices.

 

"When there is correction in the palm oil prices, there is an impact (to most of the plantation companies). This is beyond our control but looking at the current scenario, we believe by the first quarter next year, the (share) price will recover," he said.

 

FGV's share price fell four sen, or 0.87 per cent, to RM4.55 today, as analysts had expected a disappointing third-quarter result.

 

The price was also at par with the oil palm plantation giant's offer price at its initial public offering, which was Malaysia's largest listing this year and the second in the world after Facebook.

 

Sabri also said that the government's announcement to review the export tax of CPO and duty free will make Malaysian refineries more competitive versus Indonesia's.

 

The government had announced its decision to cut CPO export taxes and discontinue a tax free shipment from Jan 1, 2013 as it aspired to snatch back market share from top producer, Indonesia. Malaysia is the world's number two palm oil producer.

 

The implementation of reduced export duty on CPO would allow the refineries in Malaysia to market ther products at competitive prices to the global markets.

 

Lower Pre-Tax Profit Of RM900 Million Due To Lower CPO Prices

 

On the results, Sabri said FGV's performance was very encouraging considering the current state of the oil palm industry.

 

"Just like the other players, we are affected by lower commodity prices. However, our structure as a fully integrated palm oil player, provides us with the flexibility to respond to short term market changes," he added.

 

In tandem with the general trend of the industry, the Group recorded lower crude palm oil prices in 2012 of RM3,107 per tonne as compared to RM3,330 per tonne last year.

 

Fresh Fruit Bunch (FFB) production also declined by 365,326 tonnes to 3.47 million tonnes compared to 3.83 million tonnes previously.

 

Sabri said other contributing factors were a decrease in contribution from associates of 13.7 per cent, incurrence of fair value changes in the LLA liability of RM235.7 million, and one-off charges related to the Initial Public Offering (IPO) expenses of RM41.5 million.

 

In another development, he said FGV was embarking on a eight-year

strategic plan to grow the business turnover eight-fold, notwithstanding the current downtrend in CPO prices and lower production due to weather conditions.

 

"That means for instance, if we record RM1 billion in revenue for this year, by fiscal year ending Dec 31, 2020, we are targeting RM8 billion.

 

"We have engaged prominent consultants to do this. The eight-fold increase in revenue will hopefully, translate into profit and earnings per share," he added.

 

Sabri also said FGV is looking at expanding its plantation business by acquiring more landbank, other than improving productivity and efficiency on current assets.

           

With the focus on the Asean and West Africa region, he said the immediate and new expansion to take place next year, is in Myanmar and Indonesia.

 

"In Myanmar, we are working with a local group to expand the rubber plantations. The first project is to undertake rubber processing and then, look at the rubber plantations. They have concessions of about 30,000 hectares.

 

"At the same time in Myanmar, we already have a market presence in terms of cooking oil and the D'Saji brand is in most supermarkets in Yangon and Mandalay.

 

The next phase is to establish a packing plant in Myanmar by June next

year," Sabri added.

 

He said in Indonesia, FGV had started planting on the 15,000-hectare greenfield project in Kalimantan Barat.

 

By next year he added, the company is looking at a brownfield area within the same region, possibly about 30,000 hectares.

 

On Mindanao, he said FGV was interested in venturing to the region, but

wanted the peace deal attained to "settle down".

 

Sabri said FGV had now a systematic structure in place to approve new investments or divestments, with a stringent five-stage procedure.

 

"We have to examine among others, the risk, strategic fit, profitability and

sustainability before proceeding with any acquisition or divestment," he added. -- BERNAMA