News According to FTSE’s press release, Felda
Global Ventures (“FGV”) will be included in FTSE Bursa Malaysia KLCI index
following the semi-annual review of the FTSE Bursa Malaysia Index Series on 13
Dec 2012. The effective date will be 24 Dec 2012.
Comments We are
neutral on the news. On the positive side, plantation companies which are part
of the FBMKLCI index tend to command a PER valuation premium as compared to the
non-index planters.
However, the lock-up
period arrangement for its IPO cornerstone investors will expire by end-Dec and
this could keep the share price upside limited.
Outlook The expected lower CPO prices in FY12E should cause
FGV’s earnings to decline YoY. However, initiatives from the company to replant
its estates with better Yangambi seeds
should augur well for FGV’s long-term prospect.
Forecast We maintain our FY12E-FY13E core net profits
of RM786m-RM927m. Our main assumptions are FY12EFY13E average CPO prices of
RM2900-RM2850 per mt and FFB yields of 16.0mt/ha-18.0mt/ha.
Rating Maintain MARKET PERFORM
Its unexciting
FY12E-FY13E earnings growth should keep the share price upside limited.
Valuation We
maintain our TP of RM4.40 based on a Sum-OfParts valuation with the plantation
division valued at a Fwd. PER of 17.5x.
Risks Sustained low CPO prices.
Source: Kenanga
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