FGV has received approval to acquire the remaining 51% stake in Felda Holdings Bhd (FHB) from Koperasi Permodalan Felda (KPF) delegates in the EGM held on 27 Oct 2013. The next stop is the approval from FGV shareholders at an EGM to be held in Dec 2013, which we think should go through uneventfully. We continue to be positive on this acquisition, which we believe could be a re-rating catalyst for the stock.

- KPF gives the greenlight. FGVhas received approval to acquire the remaining 51% stake in Felda Holdings Bhd (FHB) from Koperasi Permodalan Felda (KPF) delegates at the EGM held on 27 Oct 2013.

- Next step is FGV’s EGM in Dec 2013. The next major step for FGV’s MYR2.2bn acquisition of the 51% stake in FHB is the approval of FGV shareholders, which will be decided at an EGM set to be held in Dec 2013. The acquisition is expected to be completed by end-2013. We do not expect FGV to face any issues gaining approval from its own shareholders at the upcoming EGM.

- Forecasts unchanged. We are not revising our forecasts upwards at this juncture, and will only do so when the acquisition is completed, given the pending EGM.

- We remain positive on this acquisition overall, as it would enable FGV to have complete control over the entire plantation value chain, from plantation estates to mills and refineries, which could result in better operational efficiency. In addition, this will give FGV the ability to restructure and streamline the entities within both groups and potentially dispose of non-core assets. Furthermore, we expect the acquisition to be earnings-accretive, adding c. 5-10% to FY14 net earnings. We maintain our SOP-based valuation of MYR4.84 and our BUY recommendation. We believe the re-rating catalysts highlighted in our earlier reports are falling into place, starting with its recent acquisition of Pontian United and this acquisition of the remaining 51% stake in FHB.

Source: RHB