FGVH up 5.45% after CIMB upgrade to 'hold'

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KUALA LUMPUR (Jan 27): Shares of Felda Global Ventures Holdings Bhd (FGVH)  fell before rebounding 5.45% to RM2.32 after research firm CIMB Investment Bank upgraded the stock to “hold” from “reduce”.

As at 9.13am, the stock had fallen to RM2.18 before climbing sharply to RM2.32 at 9.52am.

A total of 7.92 million shares changed hands.

In a note Jan 26, CIMB Investment Bank analyst Ivy Ng upgraded the stock to “hold” from “reduce” and said the market was undervaluing its plantation estates and FGVH was also moving to sell its non-core assets.

“We see limited downside for the stock from current levels, with the market already valuing its plantation estates at below the replacement cost of new planting,” she said.

“Its move to sell non-core assets will help improve sentiment,” she added.

Ng notes FGVH (fundamental: 2.1; valuation: 2.4) is focusing on disposing its non-core assets in the first half of 2015 (1H15) and has set up several initiatives to reduce costs as well as improve the selling price achieved for its palm products.

The group will consider selling its Canadian downstream assets, which have been posting losses in the nine months of 2014 (9M14), if it is able to clinch a good offer.

However, Ng said the research firm had lowered its target price (TP) by 20% to RM2.33 from RM2. 93 as the initiatives to increase earnings and improve its balance sheet were tempered by forecast that the stock was unlikely to re-rate significantly.

The research firm expects its fourth quarter (4Q’s) earnings to likely remain weak, and could be below consensus.

“On top of this, the stock may lose its position in the Kuala Lumpur Composite Index (KLCI) due to its lower market capitalisation,” she added.

The research firm has also lowered its earnings forecast for FGVH financial years 2014 to 2016 by 4% to 7% respectively to reflect the losses from the floods that hit the East Coast of Peninsular Malaysia,and FGVH’s acquisition of Asian Plantations Ltd at RM628 million.

(Note: The Edge Research's fundamental score reflects a company’s profitability and balance sheet strength, calculated based on historical numbers. The valuation score determines if a stock is attractively valued or not, also based on historical numbers. A score of 3 suggests strong fundamentals and attractive valuations.)