Investment Highlights

• We maintain HOLD on FGV Holdings with an unchanged fair value of RM1.14/share. Our fair value of RM1.14/share for FGV is based on a P/BV of 1.0x.
• We are neutral over Perspective Lane Sdn Bhd’s proposed injection of plantation assets into FGV via share consideration. We believe that Perspective Lane Sdn Bhd owns Tradewinds Plantation. We are unsure if there are other plantation assets in Perspective Lane.
• FGV said that it would explore Perspective Lane’s proposition and make further announcements if there are material developments.
• We believe that the proposed asset injection may result in an enlarged share base, which may be earnings dilutive. Also, we believe that a substantial portion of the oil palm estates are located in Sarawak, which sit on peat soil.
• Assuming a market price of RM80,000/ha, Tradewinds Plantation’s 129,975ha of oil palm estates may be valued at RM10.4bil (ignoring the assumption of debts). Assuming FGV issues new shares at RM1.23/share, which is a 15% premium to its closing price, the group may be issuing additional shares of more than 8bil. FGV’s current share base is 3.6bil.
• In the Bursa Announcement, FGV said that Perspective Lane would be its single largest shareholder if the exercise goes through.
• The enlarged group may have 468,412ha of oil palm estates in Malaysia. Including the land leased from FELDA, FGV has 338,437ha of oil palm estates currently while Tradewinds Plantation has planted areas of about 129,975ha (according to its website).
• We do not have Tradewinds Plantation’s latest net profit as the group was privatised at a share price of RM5.00 in 2013. Tradewinds Plantation recorded a net profit of RM142.3mil on the back of a revenue of RM2.8bil in FY12. Net gearing was 70.0%. Gross borrowings were RM1.47bil as at end-December 2012.

Source: AmInvest Research - 16 Oct 2020