FGV/Sarawak Plantations

It is eyeing a meaningful stake in Sarawak Plantation Bhd. FGV is seeking to grow its landbank and production of crude palm oil via the acquisition and is looking at buying more than the 30.39% that Abdul Hameed holds in Sarawak Plantation to grow its plantation acreage. However, the deal will require certain issues to be ironed out first such as the position of the State Financial Secretary of Sarawak Inc, the second largest shareholder in Sarawak Plantation with a 25.47% stake.

 

The state may not exit as it has to ensure the interest in the development of the NCR land that is on Sarawak Plantation’s books. But other shareholders may exit if the offer is right.

 

FGV has made known its listing prospectus that 50% of the proceeds were to be used for acquisition of plantation assets in SEA and Africa .

 

Sarawak Planation has a landbank of 51965ha of which 12914ha are NCR land. Its main attraction is the age profile of its trees. About 10.4% of the trees are in the 16-20 year bracket with 15.5% more than 20 years old. Almost 62% of the trees in the age bracket of four and 15 years.

 

A new party coming into Sarawak Plantation is not so simple. It is learnt that previous attempts to acquire the company were not approved by the state. Only a GLC can do the deal with Sarawak Plantation because the of the NCR land which belongs to the state cannot go to private companies.

Felda Global Ventures Holdings Bhd (FGVH) fair value

Target Price: FGVH: 5.65 (ECM), 5.30 (MIDF), 5.52 (Affin), 5.45 (PBB), 5.65 (M&A)

 

 

The fair value of FGV will be about 20 to 30 per cent above its initial public offering (IPO) price of RM4.55 a share … of between RM5.50 and RM6.00 based on the price earnings ratio of 18 times for the current financial year.

FGV is a large plantation company operating 343,521 hectares of oil palm plantation in Malaysia with production capacity of 5.2 million tonnes of oil palm fruits. It is also presently on an expansion trail, acquiring new plantations and expanding its downstream activities. These measures will attract investor interest and help to support the stability of its share price.

Also the company’s potential geographical expansion and cost reduction when its main focus is trained on business in the international market. The benefits derived from its collaboration with foreign investors will also play an important role not only in respect of economies of scale but also improved competitiveness as well as opening up scope for business expansion.

 

Felda Global Ventures Holdings Bhd (FGVH)'s net profit fell 87% to RM192.17mil in its first quarter ended March 31, 2012, from RM359.05mil a year earlier, on higher cost of sales and administrative expenses as well as the incurrence of fair value changes in a land lease agreement.

 

The higher revenue was primarily a reflection of the sales of crude palm oil and palm kernel by Felda Global Ventures Plantations Malaysia (FGVPM).

This was, however, offset in part by a decrease in revenue from the downstream segment as the result of tolling agreement, following which sales of soy and canola products were no longer recorded.

 

For the month to March 2012 only, revenues of FGVPM included sales of palm kernel. But for periods after that, its revenue will not include palm kernel sales.

 

Revenues of FGVPM for the three months ended March 31, 2012, only comprised sales of fresh fruit bunch.