-  According to the Press, Felda Global Ventures Holdings Bhd (FGV) is exploring options to unlock the value of its logistics arm by injecting the division into a listed or unlisted entity.

-  FGV is reported to be eyeing Century Logistics Holdings Bhd as a vehicle for the corporate exercise.

-  Century Logistics closed at RM2.68/share yesterday. It has a market capitalisation of RM311.7mil. Its main shareholder is Sin Mo Phua, who has a 27.69% equity interest.

-  Yesterday, FGV announced that nothing conclusive on Century Logistics has been agreed upon. Therefore at this juncture, the group has no material information to disclose.

-  We are neutral on this corporate exercise, if any. Currently, Century Logistics is trading at a FY14F PE of 14.9x while FGV’s FY14F PE is 21.7x.

-  In the logistics division, FGV has 10 bulking installations, 486 storage tanks with 752,250 tonnes capacity per year, 251 palm oil tankers, 186 lorries, seven distribution depots and 88,000 tonnes of warehouse storage facility.

-  If the logistics division were to be injected into Century Logistics, most of the profits would come from FGV. In FGV’s books, these would be eliminated upon consolidation.

-  It appears that this year would be a year of M&A activities for FGV. Our preference is for FGV to focus on plantation activities.

-  Maintain HOLD on FGV. The group’s net cash stood at RM3.4bil as at end-FY13. Gross cash amounted to RM5bil while borrowings totalled RM1.6bil. Apart from these, FGV also has an RM2.5bil loan due to its parent company. 

Source: AmeSecurities