This article first appeared in The Edge Financial Daily on November 27, 2017

Felda Global Ventures Holdings Bhd
(Nov 24, RM1.80)
Maintain neutral call with a higher target price (TP) of RM1.96: Felda Global Ventures Holdings Bhd (FGV) registered an improved core net profit (CNP) of RM46.5 million, which is the best quarterly CNP in the past three years based on our estimate.

This has caused its cumulative nine-month period ended Sept 30, 2017 (9MFY17) CNP to turned positive with RM10 million CNP, compared with first-half of FY17 core net loss of RM35.5 million.

We deem the results to be within expectations as we expect the profitable quarter to continue into 4QFY17, with CNP estimated at RM44 million to make up for our full-year FY17 CNP of RM54 million.

A five sen dividend (ex-date: Dec 7) is announced and this is a positive surprise.

The plantation division performed well with a profit before tax (PBT) of RM255 million (against 9MFY16’s loss before tax of RM30 million).

The improved performance is caused by better crude palm oil prices (+15% year-on-year [y-o-y] to RM2,820 per tonne) and improved fresh fruit bunch production (+3% y-o-y to 3.07 million tonnes).

However, the sugar division suffered a loss before tax of RM26 million (against 9MFY16’s PBT of RM132 million).

We maintain our FY17 CNP forecast of RM54 million. For FY18, we expect FGV to register a CNP of RM70 million.

We have increased our price-booking target to 1.23 times (from one times) as we expect more sustainable profitability for FGV in the future.

The 1.23 times price-booking target reflects +0.5 standard deviation in view of the positive reasons stated above. — MIDF Research, Nov 24