-  Maintain HOLD on Felda Global Ventures Holdings (FGV) with an unchanged fair value of RM5.05/share. Our fair value is based on a FY14F PE of 24x.

-  FGV’s FY13 results were below consensus estimates but within our expectations.

-  FGV has declared a final gross DPS of 10 sen, which brings total gross DPS for FY13 to 16 sen. This translates into a yield of 3.5% and payout of 59%.

-  Group turnover slid by 2.5% to RM12.6bil in FY13 due to lower CPO price. Core net profit contracted by 46.9% from RM978.2mil in FY12 to RM517.5mil in FY13.

-  Pre-tax profit of the plantation division (before elimination) fell by 48.3% to RM686.9mil in FY13. Average CPO price realised was RM2,333/tonne in FY13, 17.9% weaker than the average of RM2,843/tonne achieved in FY12.

-  Impact of the fall in CPO price could not be offset by an increase in CPO production in FY13. FGV’s FFB production growth was about 2.9% in FY13.

-  We believe that FGV’s production cost was more than RM1,300/tonne in FY13. Production cost per tonne is expected to hover between RM1,350/tonne and RM1,400/tonne in FY14F.

-  Pre-tax loss of the downstream division (before elimination) widened from RM12mil in FY12 to RM45.2mil in FY13.

-  The refining division was affected by the rise in CPO prices in 4QFY13. We understand that refining margins were a negative RM30/tonne to RM40/tonne.

-  Manufacturing, logistics and others division recorded a pre-tax profit of RM186.8mil in FY13 versus RM343.3mil in FY12. The division was dragged by lower fertiliser production and prices and an impairment loss of RM20mil.

-  FGV is expected to replant 15,000ha in FY14F, which is the same as FY13. Replanting cost is estimated to range between RM14,000/ha and RM15,000/ha.

-  As at end-Dec 2013, more than half of FGV’s oil palm trees were 20 years and above. We believe that the average age of the group’s oil palm trees is 17 years old. 

Source: AmeSecurities