Investment Highlights

• We maintain SELL on FGV Holdings with a higher fair value of RM1.65/share vs. RM1.20/share previously. Our fair value for FGV is based on a FY23F PE of 22.0x. We ascribe a three-star ESG rating to FGV.

• We have raised FGV’s FY22F net profit by 21.1% to account for a higher average CPO price of RM4,000/tonne vs. RM3,000/tonne previously. FGV’s FY23F net profit is also 34.7% higher than our original forecast due to a stronger palm EBIT margin.

• The deadline for FGV to resolve its public shareholding issue has been extended to 3 August 2022 from 3 February 2022. FGV’s public shareholding spread is 12.92% presently. FGV has not formulated a plan to address its public shareholding spread yet.

• FGV has declared a final gross DPS of 8.0 sen for FY21. This translates into a yield of 3.9%.

• FGV’s core net profit (ex-land lease changes) of RM757.9mil for FY21 was within our forecast but above consensus estimates.

• FGV’s average CPO price realised was RM3,671/tonne in FY21 compared with RM2,675/tonne in FY20. On a negative note, the group’s FFB production fell by 7% in FY21 dragged by a shortage of estate workers and temporary shutdown of operations during MCO 3.0.

• Comparing 4QFY21 against 3QFY21, FGV’s plantation pretax profit excluding land lease charges only inched up 2.7% to RM591.7mil due to an impairment of RM68.4mil. Average CPO price realised increased by 10.4% to RM4,194/tonne in 4QFY21 from RM3,798/tonne in 3QFY21.

• FGV’s sugar division swung into a pre-tax profit of RM85.7mil in FY21 from a pre-tax loss of RM33.3mil in FY20 on the back of higher selling prices.

• FGV’s logistics and others division reported a higher pretax profit of RM90.4mil in FY21 vs. RM50.5mil in FY20. The earnings improvement in FY21 was supported by higher handling charges and lower expense in the IT division.

Source: AmInvest Research - 1 Mar 2022