FGV earnings to remain sanguine despite unsuccessful privatisation bid by Felda, says MIDF Research

KUALA LUMPUR, March 16 — FGV Holdings Bhd’s earnings are expected remain sanguine, boosted by the favourable crude palm oil (CPO) price and modest fresh fruit bunches production, despite the unsuccessful attempt to privatise the company by the Federal Land Development Authority (Felda), said MIDF Research.

It said the higher average selling price (ASP) of refined sugar and increase in sales volume would also be able to help MSM Malaysia Holdings Bhd to further increase its earnings in the coming quarters.

“We leave our earnings estimates for financial year 2021 (FY21) and FY22 unchanged at RM323.4 million and RM361.3 million respectively,” it said in a note today.

Despite the ban by the United States on imports of palm oil from FGV over allegations of forced labour, MIDF Research believed that FGV’s outlook will remain resilient given that the company will revisit the appointment of an independent audit firm for an audit of its operations within a reasonable period of time.

“(It) will continue to engage with the US Customs and Border Protection accordingly once an independent auditor has been appointed,” it said.

Based on a Bursa Malaysia announcement today, Felda only managed to obtain 80.99 per cent of the total issued shares (excluding treasury shares) in FGV.

“We do note that the current shares obtained were not enough as Felda is required to obtain 90 per cent of the shares, hence, this led to an unsuccessful attempt on FGV privatisation,” it said.

The group has extended the closing date for the acceptance of the takeover offer to March 15, 2021. The original deadline was on the Feb 2, 2021 which was then postponed to Feb 16, 2021, and subsequently to March 2, 2021.

It said one of the factors that contributed to the unsuccessful attempt to take over FGV was the unattractive offer price of RM1.30 per share.

“As the current CPO price, which has breached RM4,000 a tonne, which is also at an all-time high, minority shareholders might have been seeking for a higher valuation,” it said.

Hence, MIDF Research is maintaining a “Neutral” recommendation on FGV with an unchanged target price of RM1.31. — Bernama