Highlights

FGV-Holdings - Felda To Terminate Land Lease?

Date: 19/10/2020

Source  :  AmInvest
Stock  :  FGV       Price Target  :  1.14      |      Price Call  :  HOLD
        Last Price  :  1.21      |      Upside/Downside  :  -0.07 (5.79%)
 


  • According to press reports, Felda plans to take back the land it is leasing to FGV Holdings. On the compensation of the land with the termination of the lease, Datuk Seri Idris Jusoh, who is Felda’s chairman, said that it has not been discussed in detail.
  • To lease the land, FGV pays RM243.8mil cash and 15% of plantation profits attributed to the land, to Felda annually. FGV paid land lease payments of RM298.7mil in FY18 and RM248.7mil in FY19. FGV also pays for the replanting of the land every year.
  • There are several implications here. First, if Felda takes back the land, which is leased to FGV, we are unsure if Perspective Lane would still be interested to inject its plantation assets into FGV.  Second, FGV’s total landbank in Malaysia and Indonesia may drop to about 55,000ha to 60,000ha from more than 400,0000ha. According to FGV’s Annual Report 2016, FGV leases about 362,747ha of land from Felda. The leased land accounts for a third of FGV’s FFB processed.
  • Third, it is uncertain how much compensation FGV would receive from Felda. According to the land lease agreement, the compensation is partly determined by the profit per mature area and the size of the land. According to FGV’s balance sheet, the land lease agreement liability stood at RM4.3bil as at end-December 2019.
  • If Felda wants to terminate the land lease, it has to give an 18-month notice to FGV. After that, the compensation amount would be calculated. Then, the leased assets would be transferred back to Felda.
  • Fourth, FGV may be flushed with cash if Felda terminates the land lease and pays the compensation. The group would be able to look for investment opportunities.
  • As there are too many uncertainties currently, we maintain our HOLD recommendation on FGV with a fair value of RM1.14/share.

Source: AmInvest Research - 19 Oct 2020

Share this
Labels: FGV

Related Stocks

Chart Stock Name Last Change Volume 
FGV 1.21 +0.01 (0.83%) 25,022,000 

  Be the first to like this.
 


APPS
I3 Messenger
Individual or Group chat with anyone on I3investor
MQ Trader
Earn MQ Points while trading with MQ Traders Group
MQ Affiliate
Earn side income from MQ Affiliate Program
 
 

558  569  568  475 

ActiveGainersLosers
Top 10 Active Counters
 NameLastChange 
 AT 0.200.00 
 YTL 0.645-0.005 
 SAPNRG 0.1150.00 
 KANGER 0.18-0.005 
 HIAPTEK 0.28+0.025 
 TDM 0.305+0.04 
 VIVOCOM 1.14+0.13 
 HIAPTEK-WB 0.065+0.02 
 FOCUS 0.67+0.015 
 BINTAI 0.82+0.025 

FEATURED POSTS

1. The Equity Market Index Benchmark in Malaysia CMS
2. Trading Scenarios of Derivatives Bursa Derivatives Education Series
3. Derivatives 101 Bursa Derivatives Education Series
4. Why Trade FKLI? Bursa Derivatives Education Series
5. MQ Trader - Introduction to MQ Trader Affiliate Program MQ Trader Announcement!
PARTNERS & BROKERS