INVESTMENT HIGHLIGHTS

• FY17 core earnings is above expectation

• Plantation division is the star performer

• Improvement in the sugar division

• Earnings estimate increased

• Maintain NEUTRAL with TP of RM1.96

FY17 core earnings is above expectation. Felda Global Ventures Holdings Berhad (FGV) FY17 Core Net Profit (CNP) of RM59.2m is better than expected as it makes up 110% of our estimate of RM54.0m. FFB growth came in better than expected at 9% yoy growth in FY17. As expected, no dividend was announced.

Plantation division is the star performer. Plantation division performed well with PBT growth of 137% yoy to RM554m. The improved performance is caused by better CPO price (+9% yoy to RM2792 per tonne) and improved FFB production (+9% yoy to 4.26m tonnes).

Improvement in the sugar division. Although sugar division registered lower PBT of RM2m in FY17 (against FY16's RM152m), it has shown improvement with 4QFY17 PBT of RM28m. This is better than 3QFY17 PBT of RM16m and managed to turn the division into slight profitability of RM2m for the whole FY17 (against 9MFY17 Loss Before Tax of RM24m). We gather that the improved performance qoq is caused by lower raw sugar material costs.

Earnings estimate increased. We increase our FY18 CNP forecast to RM108m (from RM70m) after imputing higher FFB volume assumption. We have also introduced our FY19 CNP forecast of RM117m.

Maintain NEUTRAL with TP of RM1.96. Despite the increase in our earnings forecast, we maintain our Target Price as it is based on Price to Book target of 1.23x. The 1.23x Price To Book reflects +0.5 Standard Deviation in view of more sustainable profitability seen for FGV.

Source: MIDF Research - 26 Feb 2018