Period  4Q13 and FY13

Actual vs. Expectations Felda Global Ventures (FGV)’s FY13 core net profit* (CNP) of RM591m is within expectations at 98% of both consensus (RM602m) and our forecast (RM605m).

 We have excluded the non-cash estimated Land Lease Agreement (LLA) adjustment gain of RM369m, negative goodwill arising from FHB Acquisition (RM65m), gain from disposal of Tradewinds of RM27m, impairments of RM41m, forex loss of RM27m and other non-cash adjustments.

Dividends  As expected, a final single tier dividend of 10.0 sen was announced (subject to AGM approval).

Key Results Highlights YoY, FY13 CNP declined 23% to RM591m as CPO prices declined 18% to RM2333/mt. However, this is mitigated by better earnings from its sugar division (PBT +24% to RM389m).

 QoQ, 4Q13 core net profit increased 128% to RM212m due to seasonally higher FFB volume (+6% to 1.38m mt) and better CPO prices (+4% to RM2425/mt).

Outlook  We believe CNP for FY14 should improve in line with our expectations for better CPO prices of RM2800/MT (against RM2333/MT in FY13). However, we believe its downstream division may take a longer time to turn around given its higher Loss Before Tax of RM45m in FY14 (against FY13’s RM12m).

Change to Forecasts We maintain core net profit estimate of RM925m and RM951m for FY14E and FY15E, respectively.

Rating Maintain MARKET PERFORM

 The bright prospect from the plantation division is neutralised by concerns over its downstream operations. We may consider upgrading FGV when we see a sustainable turnaround in its downstream operation.

Valuation  We maintain our Target Price of RM4.75 based on unchanged 18.7x Fwd. PE on CY14E EPS of 25.4 sen.

Risks  Lower than expected CPO prices.

 Lower than expected margin for downstream division.

Source: Kenanga