• Maintain HOLD (TP: RM1.30). FGV Holdings (FGV) recorded a 9MFY24 core PATAMI of RM243mn compared to a loss of RM88mn in 9MFY23, primarily due to better performance across all division, except for the Oils and Fats division. The Plantation division posted a remarkable profit of RM134.4mn, recovering from a loss of RM4mn in 9MFY23. This was attributable to 1) higher FFB processed, stemming from a 12% YoY increased in FFB production to 2.9mn MT, 2) improved FFB yield at 11.36 MT/ha (+17% YoY) and OER of 20.60% (9M23: 20.52%), 3) stable average CPO prices realised at RM4,004/MT (+1% YoY), and 4) lower CPO cost ex-mill. Overall, FGV's core PATAMI were above both our and consensus full year forecast. We maintain our forecast and HOLD call with unchanged TP of RM1.30 for now, pending additional details from meeting. Our TP is based on FY25F BV/share of RM1.67 and avg. P/BV of 0.78x.

• Key Highlights. FGV’s 3QFY24 PBT jumped by 89% YoY to RM157mn, driven by higher profit contributions from Plantation and Logistics & Support divisions, which offset the weaker performance from the Sugar and Oil & Fats division. The Plantations division benefited from i) higher FFB yield of 4.72 MT/ha (+27% YoY), ii) improved CPO realised selling prices to RM3,980 (+3% YoY), and iii) lower CPO cost ex-mill of RM2,231/MT (-20% YoY) resulted from lower estate and processing costs. Conversely, the weaker performance from Sugar division was mostly due to forex losses, while the Oils & Fats division experienced a drop in margin due to intense competition.

• Earnings Revision. Maintain our forecast at this juncture, pending meeting.

• Outlook. We are cautiously optimistic on FGV’s Plantation division outlook, driven by stable production and favourable palm oil prices. However, the Oil & Fats segment is expected to face persistent margin pressures due to heightened competition. Key risks include: (i) economic slowdowns in key markets, (ii) oversupply of vegetable oils or regulatory changes impacting CPO prices, and (iii) lower FFB and CPO production from adverse weather conditions.

Source: BIMB Securities Research - 28 Nov 2024