- Felda Global Ventures Holdings Bhd (FGV) has acquired 100% of Felda IFFCO South China Ltd from Felda IFFCO Sdn Bhd for RMB320mil or RM172.2mil.

- According to the Bursa Announcement, Felda IFFCO South China operates the second largest fractionation capacity and storage tank capacity in South China.

- Its refining capacity is the third largest in South China. The facilities are located close to Port Xinsha, which is the most active trading port in South China.

- We believe that Felda IFFCO South China has a refining capacity of 630,000 tonnes per year and fractionation capacity of 930,000 tonnes per year.

- Other than these, there were no other details on Felda IFFCO South China. Hence, we do not know whether the purchase consideration is fair or Felda IFFCO South China is profitable.

- We believe that Felda IFFCO Sdn Bhd is a 50/50 joint venture between FGV and IFFCO. IFFCO is a consumer goods manufacturer and marketing company based in United Arab Emirates.

- Apart from Felda IFFCO South China, Felda IFFCO also owns refineries in Malaysia, Indonesia and Turkey.

- We reckon that FGV is taking control of Felda IFFCO South China as it probably wants to play a more active role in driving the operations in China.

- In 1HFY14, FGV’s share of profits in joint ventures, which includes contribution from Felda IFFCO, was RM23.3mil. In 2QFY14, FGV’s share of losses in the joint ventures was RM10.1mil.

- Maintain HOLD on FGV with an unchanged fair value of RM3.83/share.

Source: AmeSecurities