Period     1Q13

Actual vs. Expectations     Felda Global Ventures (“FGV”) 1Q13 core net profit of RM122m missed both consensus and our forecast. It makes up only 16% of both consensus’ forecast (RM769m) and ours (RM782m).

Associates income from Felda Holdings Berhad (“FHB”) plantation division disappointed significantly with RM3.3m loss. We gather that FHB’s midstream milling business suffered negative margin due to unfavourable margin between its purchase price of FFB and the selling price of CPO. Note that FGV owns 49% stake in FHB.

Dividends    As expected, no dividend is announced.

Key Results Highlights     YoY, 1Q13 core net profit tumbled 38% to RM122m as CPO prices was lower by 29% to RM2264/m and associates income from FHB turned negative. This is mitigated slightly by FFB volume growth of 8% to 1.22m mt.

QoQ, 1Q13 core net profit declined 12% to RM122m due to seasonally lower FFB production (-11% to 1.22m mt) and FHB negative milling margin.

Outlook    Current low CPO prices and the latest earnings miss should limit the share price upside.

Change to Forecasts   We have reduced both our FY13E-FY14E core net profit by 8% to RM723m-RM895m after assuming lower milling margin for FHB.

Rating    Maintain MARKET PERFORM

Despite the weak 1Q13 result, share price should be supported by the strong liquidity in the local market.

Valuation     We have trimmed our TP to RM4.60 (from RM5.00) based on unchanged 18.7x Fwd. PE on lower CY14E EPS of 24.5 sen (from 26.7 sen).

Risks    Lower than expected CPO prices.

Lower than expected milling margin at FHB.

Source: Kenanga