IMPROVED EFFICIENCY: Research houses revise upward their forecasts for plantation operator
ALLIANCE Research has revised upwards Felda Global Ventures Holdings Bhd (FGV)'s 2014 and 2015 earnings estimates by 30 and 32 per cent, respectively.
This is on the basis that its acquisition of Felda Holdings Bhd will be completed by year-end.
The research note said FGV's acquisition of the remaining 51 per cent stake in Felda Holdings from Koperasi Permodalan Felda for RM2.2 billion will streamline the group's operations and earnings accretive.
"We are upgrading our call on Felda Global from 'sell' to 'neutral' with a higher target price of RM4.03 from RM3.10 previously," it said in a note.
Meanwhile, in a separate note, RHB Research said the acquisition will enable FGV to have complete control over the entire plantation value chain, resulting in better operational efficiency.
The research house expects the acquisition to add 10 per cent to the company's 2014 net earnings estimates, leading to its recommendation of "buy" from "neutral", with a higher target price of RM4.84 from RM4.60.
Felda Holdings is the largest crude palm oil producer in the world with 3.3 million tonnes, accounting for eight per cent of the global market last year.
It operates 71 palm oil mills, seven refineries, four kernel crushing plants as well as several bulking installations and distribution depots and warehouses.
HwangDBS Vickers Research said Felda Holdings contributed 19 per cent to FGV's 2012 financial year core profit.
It expects the deal to boost the company's 2014 financial year core earnings by about 20 per cent.
"We maintain our forecast and our 'hold' recommendation for now, pending shareholders' approval of Felda Global and Koperasi Permodalan Felda," it added in a note. Bernama