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KUALA LUMPUR, Aug 25 — Research houses have maintained their positive calls on FGV Holdings Bhd following the group's healthy second quarter financial results announced yesterday.
CGS-CIMB Research upgraded its call on FGV to “hold” from “reduce,” due to its expectation that the company would post better earnings in the second half of 2020 (H2 2020) as higher production is expected to offset higher fertiliser costs.
“However, we expect the sugar division to remain in a loss due to the challenges in raising the utilisation rate of its Johor refinery,” it said in a research note today.
In a separate note, MIDF Research said the anticipated improvement in fresh fruit bunch (FFB) yield and crude palm oil (CPO) price due to the potential easing of lockdowns globally in H2 2020 would sustain FGV's turnaround trajectory seen in H1 2020.
“The group’s continued diversification plan into downstream consumer products, especially to India through partnership with a local company, and the signing of a distributorship agreement with My Agro Hub Resources involving 30 tonnes of animal feed monthly could continue to strengthen its downstream fast-moving consumer goods business,” it said.
Additionally, it said the higher average selling price of refined sugar and potential higher sales volume in its sugar segment would help the group to sustain its profitability as well.
“Nonetheless, we believe that the turnaround could be met with headwinds should there be any resurgence of Covid-19 outbreak and extended lockdowns,” it added.
The research firm maintained its “neutral” call on the group, but raised its target price (TP) for FGV’s shares to RM1.22 per share from RM1.02 per share previously.
Meanwhile, in a research note, Kenanga Research has also upgraded its call on FGV to “market perform” but with an unchanged TP of RM1.15 per share.
“While we anticipate rising production in the coming months to exert downward pressure on CPO price, we note that FGV’s share price has recently fallen 9.0 per cent to a more reasonable valuation level, warranting the call,” it said. — Bernama
