-  The Press reported that Felda IFFCO Sdn Bhd has agreed to sell its biodiesel facility in Ohio to United States-based refiner Marathon Petroleum Corporation (MPC).

-  MPC is US’ fourth largest refiner with a crude oil refining capacity of 1.7mil barrels per day.

-  The production capacity of Felda IFFCO’s biodiesel facility is reported to be 4,100 barrels per day or an estimated 200,000 tonnes year.

-  The selling price of the biodiesel plant was not disclosed. It was mentioned that the transaction is expected to be completed in April 2014.

-  Felda Global Ventures (FGV) owns 50% of Felda IFFCO. The other shareholder is IFFCO Holdings, which is based in United Arab Emirates.

-  We are neutral on this development. Felda IFFCO is not a major contributor to FGV’s earnings. We estimate FGV’s share of losses in the joint venture at RM28.1mil in FY12.

-  Assuming a replacement cost of RM350/tonne, we estimate that the selling price of Felda IFFCO’s biodiesel plant in the US could be RM70mil.

-  The replacement cost of a biodiesel plant in Malaysia is roughly RM300/tonne to RM350/tonne.

-  In April 2013, FGV acquired Mission Biotechnologies Sdn Bhd, which has an annual capacity of 100,000 tonnes, for RM35mil.

-  Felda IFFCO is largely a palm oil refiner. The joint venture owns two refineries in Malaysia and four refineries in Indonesia, China and Turkey. As a group (including Felda IFFCO), FGV’s refining capacity is more than 5mil tonnes per year.

-  We maintain HOLD on FGV. The group is currently trading at a FY14F PE of 20.9x. 

Source: AmeSecurities