Felda Global Ventures Holdings Bhd
(March 20, RM2.09)
Maintain neutral with an unchanged target price of RM1.77: According to a report in The Edge weekly, it is believed that Felda Global Ventures Holdings Bhd (FGV) is in talks with two companies — one linked to businessman Tan Sri Syed Mokhtar Albukhary and the other China-based China National Cereals, Oils and Foodstuffs Corp (Cofco) — to take a strategic stake in the plantation company. If it is true, we believe that the pricing of the new placement as well as long-term synergy between the parties will be the key highlights in the deal.

Syed Mokhtar has controlling interests in a few listed companies in Malaysia, namely DRB Hicom Bhd, MMC Corp Bhd, Malakoff Corp Bhd, Pos Malaysia Bhd, Bina Puri Holdings Bhd and Gas Malaysia Bhd, as well as non-listed companies such as Tradewinds and Padiberas Nasional Bhd. The plantation business is parked under Tradewinds Plantations Bhd, one of the largest oil palm and rubber plantation companies in Malaysia owning about 160,000ha of land bank. Interestingly, former FGV chief executive officer and president Datuk Mohd Emir Mavani Abdullah has joined one of Syed Mokhtar’s private outfits. Rumours surfaced last July saying that Syed Mokhtar was in preliminary talks to buy into FGV, but this was subsequently denied by the company.

Cofco is a state-owned food processing company, which is also the largest food processor, manufacturer and trader in China. It has controlling interests in 11 listed companies in Hong Kong, including China Foods Ltd, China Agri-Industries Holdings Ltd, Mengniu Dairy Co Ltd, Fountain Set Holdings Ltd, Joy City Property Ltd, Cofco Meat Holdings Ltd and CPMC Holdings Ltd, as well as four listed companies in China, namely, Cofco Tunhe Co Ltd, Jiugui Liquor Co Ltd, Cofco Property Group Co Ltd and Cofco Biochemical (Anhui) Co Ltd. 

It is involved in many industries, including Fortune edible oil, Great Wall wine, Mengniu dairy, Lohas fruit and vegetable juice, Le Conte chocolate, Tunhe tomato products, Joycome meat products, Joy City shopping mall, Yalong Bay resorts, Gloria hotels, Snow-Lotus cashmere, Zhongcha tea products, Cofco Trust and Cofco-Aviva Life Insurance. 

It is ranked No 121 in the Fortune Global 500.

It is tough to see any potential synergies arising between Syed Mokhtar’s plantation arm and FGV given that both are in the plantation-related space. The entry of Cofco could, however, potentially boost FGV’s venture into China’s downstream market. Nevertheless, given the tightening of capital controls in China, Cofco’s strategic investment in Malaysia might experience a stumbling block in the form of its own central bank. — PublicInvest Research, March 20