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Tuesday December 4, 2012

Felda Global Ventures 9-month profit misses forecasts

By EUGENE MAHALINGAM
eugenicz@thestar.com.my


PETALING JAYA: Felda Global Ventures Holdings Bhd's (FGVH) net profit for the nine-month period ended Sept 30, 2012 was generally below expectations and missed analysts' forecasts.

“Adjusted for one-off items, nine-month core net profit of RM643.3mil is below expectations, accounting for only 70% of our full year (ending Dec 31, 2012 {FY12}) forecast of RM913.1mil and 69% of consensus average when crude palm oil (CPO) prices have fallen sharply in the fourth quarter of 2012,” according to Affin Investment Bank in its recent research report.

“Based on a flat fresh fruit bunches (FFB) production and CPO average selling price of RM2,400 per tonne, the fourth quarter net profit could be as much as RM90mil lower. After also tweaking operating expenses, FY12 net profit forecast is cut by 13.2%.”

For its nine months, the plantation conglomerate's net profit declined RM40.3% to RM626.14mil from RM1.05bil previously, while revenue rose 62% to RM9.03bil from RM5.58bil previously.

The decline in net profit was mainly due to lower CPO prices and FFB production, increase in replanting, manuring, labour and fertiliser costs, fair value changes in land lease agreement (LLA) liability of RM235.7mil, lower associate contribution, and one-off initial public offering-related charge of RM41.5mil.

MIDF Research in its report also said the company's earnings were below expectations: “FGVH earnings in the third quarter came in below our expectations but within consensus estimates, accounting for 19% and 26% of the full year forecasts respectively.”

Malaysia Equity Research noted that FGVH's third-quarter earnings were weak, adding that it was cutting the company's expected FY12 earnings by 1% on expectations of a 6% decline in FFB output due to slower-than-expected yield recovery.

“This was offset by smaller fair value changes on land lease liability, based on management guidance,” it said, adding that it has also imputed new CPO export tax policy that would cause expected FY13 to FY14 earnings to be cut by 18% due to an inflexible LLA charge.

MIDF Research in its report also said it was revising downwards its earnings forecast for FGVH.

“As we are expecting CPO prices to remain subdued for the remainder of the year, we revise our FY12 earnings forecast by 13.2% to RM1.13bil. Nonetheless, we maintain our earnings forecast for FY13 as we expect CPO prices to rebound going forward.”

CIMB Research in its report, meanwhile, said it is cutting FGVH's FY12 to FY14 core net profit forecast by 6% to 9% to account for lower joint venture (JV) contributions.

“However, our target price of RM4.70 (based on an unchanged 10% discount to sum-of-parts) remains intact, as we value the group's JV based on historical purchase consideration. We maintain neutral' as we see support in the form of mergers and acquisitions potential.”

Shares of FGVH finished the day up 4 sen to RM4.59. Earlier, it had dipped below its IPO price of RM4.55.

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