INVESTMENT HIGHLIGHTS

• Selling Taiko Clay Chemicals (TCC) for RM145.0m

• TCC is a chemical company (non core asset for FGV)

• We are positive on the news

• Earnings estimate maintained

• Maintain NEUTRAL with TP of RM1.75

Selling Taiko Clay Chemicals (TCC) for RM145.0m. Felda Global Ventures Holdings Berhad (FGV) has announced that its effectively 72% owned subsidiary Felda Palm Industries Sdn. Bhd. has proposed to dispose its 30% stake in Taiko Clay Chemicals Sdn. Bhd. (TCC) for RM145.0m. Expected disposal gain is RM16.1m. Completion date is expected to be in 2H2018.

TCC is a chemical company (non core asset for FGV). TCC is involved in manufacturing and sale of activated bleaching earth and related products, production of sulphuric acid, oleum and battery acid and general trading and manufacturing of aluminium sulphate.

We are positive on the news. The sale of non core asset should improve FGV management focus on its core businesses which include plantation, sugar and logistics. There is also gain of RM16.1m from the sale of this non core asset. Lastly, net gearing is expected to improve to 0.40x from 0.42x.

Earnings estimate maintained. Pending the completion of the deal, we maintain our earnings estimate for FY18 and FY19.

Maintain NEUTRAL with TP of RM1.75. Our TP is based on 1.1x Price To Book which is a Mean Valuation. The next key event to watch will be the 1QFY18 earnings which will be released by end of May.

Source: MIDF Research - 15 May 2018