Felda Global  Ventures (FGV) announced that as at  4.30pm (UK time) on  22  October  2014,  it  had  received  valid  acceptances  representing approximately  97.2%  of  the  total  number  of  issued  shares  of  Asian Plantations  Ltd  (APL).  The  offer  remains  open  for  acceptances  until 4.30pm (UK time) on 27 October 2014. (Source: Bursa Malaysia)

Comment:  APL  has  five  wholly-owned  plantation  estates  totalling approximately  24,622  ha  located  south-east  of  Miri  and  north-east  of Bintulu. The estates are  on  60–year leases and all are  of mineral soil type.  We  understand  that  total  planted  area  is  now  approximately 16,000  ha,  up  from  12,161  ha  as  at  end-2013.  APL’s  five  estates  are serviced by a 120MT/hr palm oil mill with an initial operating capacity of 60MT/hr.  FGV  currently  owns  390,234  ha  of  plantation  land  bank  in Malaysia  and  77,422  ha  in  Indonesia.  The  APL  acquisition  hence  will increase the group’s total land bank by 5.3%.

APL recorded net losses of US$11.6m in  2011, US$6.9m in 2012 and US$10.4m  in  2013.  Based  on  the  mature  areas  of  5,135  ha  and assuming  a FFB  yield  of  15  MT/ha  and  an OER  of  22%  as well  as  a CPO price of RM2,600/MT and cost of funds of 5%, the acquisition of APL, even though potentially long term positive, would have a negative 2.2%  impact  on  FGV’s  2015E  earnings.  We  maintain  our  forecasts, target price of RM4.34 and ADD rating.

Source: Affin Hwang Capital Research - 24 Oct 2014