Highlights

FGV Holdings - Expression of Interest From Syed Mokhtar

Date: 22/10/2020

Source  :  HLG
Stock  :  FGV       Price Target  :  1.08      |      Price Call  :  HOLD
        Last Price  :  1.16      |      Upside/Downside  :  -0.08 (6.90%)
 


FGV received an expression of interest from PLSB (a wholly-owned unit by Tan Sri Syed Mokhtar Albukhary’s privately-owned Restu Jernih Sdn Bhd), which expressed its interest to participate in FGV via an injection of plantation assets into FGV. While details remain sketchy at this juncture, the latest development could trigger an MGO as PLSB had book value of circa RM1.9bn as at 31 Dec 2018 (vs. FGV’s book value of circa RM4.2bn as at 31 Dec 2019), and shareholders’ approval will be required during EGM. Besides, we note that FGV’s LLA would also be a key consideration in this matter. Maintain earnings forecast, SOPderived TP of RM1.08 and HOLD rating on the stock for now, given the sketchy details thus far. Nevertheless, we believe near-term share price sentiment will be lifted arising from the latest development.

Expression of interest from Syed Mokhtar. FGV announced that it has received an expression of interest from Perpesctive Lane (M) Sdn Bhd (PLSB), which expressed its interest to participate in FGV via an injection of plantation assets into FGV. The board wishes to assure shareholders and key stakeholders that it will discharge its fiduciary duty in any such deliberation and shall make further announcement if there are further material developments in respect of this matter.

More details on PLSB. PLSB is a wholly-owned unit by Tan Sri Syed Mokhtar Albukhary’s privately-owned Restu Jernih Sdn Bhd, and owns the Tradewinds group of companies, including Tradewinds (M) Bhd (which also owns Padiberas Nasional Bhd), Tradewinds Plantations Bhd and Central Sugar Refinery Sdn Bhd). Based on PLSB latest audited financial report, it had a book value of RM1.96bn and reported a net profit of RM1.06bn in FY12/18.

News of Syed Mokhtar’s interest in FGV had been circulating since Sep-19. We note that the news of Tan Sri Syed Mokhtar eyeing on FGV had been circulating since Sep-19, which he was reportedly scouting around meeting with financial intuitions (for funding of more than RM1bn) to facilitate the acquisition back then (when FGV was trading at below RM0.90/share).

Details remain sketchy at this juncture. While details remain sketchy at this juncture, the latest development could trigger a mandatory general offer (MGO), as PLSB had book value of circa RM1.9bn as at 31 Dec 2018 (vs. FGV’s book value of circa RM4.2bn as at 31 Dec 2019), and shareholders’ approval will be required during the Extraordinary General Meeting (EGM). Besides, we note that land lease agreement (LLA) would also be a key consideration in this matter.

Forecast. Maintain, as details remain sketchy at this juncture.

Maintain HOLD; TP: RM1.08. We maintain our HOLD rating on FGV, with an unchanged SOP-derived TP of RM1.08, given the sketchy details provided thus far. Nevertheless, we believe near-term share price sentiment will be lifted arising from the latest development.


 

Source: Hong Leong Investment Bank Research - 22 Oct 2020

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