Period  3Q13 and 9M13

Actual vs. Expectations Felda Global Ventures (FGV)’s 9M13 core net profit of RM411m is below expectation as it only makes up 60% of consensus full year forecast of RM681m. However, it is broadly within our estimate, at 68% of our full year estimate of RM605m.

 We have excluded the non-cash estimated Land Lease Agreement (LLA) Adjustment Gain of RM110m, Jointly Controlled Entity Impairment Loss of RM14m, Biological Asset Write-Off at RM18m and other non-cash adjustments.

Dividends  A single tier dividend of 6.0 sen was announced and this is a positive surprise to us as we have previously assumed that FGV will collectively pay its dividend as final dividends after FY13 closing.

Key Results Highlights YoY, 9M13 core net profit declined 48% to RM411m as CPO prices declined 26% to RM2302/mt. However, this is mitigated by better earnings from its sugar division (PBT +36% to RM320m).

 QoQ, 3Q13 core net profit increased 29% to RM93m due to seasonally higher FFB volume (+6% to 1.30m mt) and slightly better CPO prices (+2% to RM2341/mt).

Outlook  4Q13’s outlook should be better as FGV will be consolidating Pontian earnings for the first time. Additionally, FGV is in the process of acquiring the remaining 51% stake in Felda Holdings Berhad (FHB) and it is now in the last stage of getting approval via EGM. If the deal is successful, it should bode well for its FY14E outlook.

Change to Forecasts We maintain core net profit estimate of RM605m and RM890m for FY13E and FY14E respectively.

Rating Maintain MARKET PERFORM

 We think most of the positive news flow should have already been priced in as FGV is now trading at FY14E Fwd. PER of 18x, close to other big cap planters’ valuations.

Valuation  We maintain our Target Price of RM4.55 based on unchanged 18.7x Fwd. PE on CY14E EPS of 24.4 sen.

Risks to Our Call Lower than expected CPO prices.

 Lower than expected margin for downstream division.

Source: Kenanga