FGV shares higher despite downbeat Q3 results

01/12/2022 04:07 PM

KUALA LUMPUR, Dec 1 (Bernama) -- Shares of FGV Holdings Bhd were higher at the midafternoon session despite posting weaker third quarter financial year 2022 (Q3 2022) results. 

At 3.05 pm, FGV rose one sen to RM1.36, with 102,900 shares transacted.

In a filing with Bursa Malaysia yesterday, FGV’s net profit for the Q3 ended Sept 30, 2022 went down to RM241.67 million from RM399.39 million recorded in Q3 2021, while revenue rose to RM6.18 billion from RM5.32 billion previously.

The plantation group said the higher revenue was driven by the higher average crude palm oil (CPO) price realised during the quarter, while the lower net profit was mainly attributed to losses incurred in its sugar sector and lower CPO and processed palm oil (PPO) sales volume recorded by its plantation segment.

PublicInvest Research has maintained a neutral call on FGV with unchanged target price (TP) of RM1.61, as it said FGV’s nine months of financial year 2022 (9M 2022) core earnings of RM876 million were above its full year forecast, making up 81 per cent but it met market expectations.

“We make no changes for our earnings projection as plantation earnings are likely to be weaker in Q4 2022 due to higher production cost.

“Nevertheless, we think its share price performance would be clouded by the likelihood of privatisation due to lower free float,” the stockbroking firm said in a research note today.

As for MIDF Research, it has slashed FGV’s FY2022-FY2023 earnings estimates by 12 per cent/15 per cent following the anticipation of the plantation company’s weak fresh fruit bunches (FFB) production catch and increase in manuring and labour cost as well as on possible margin squeeze due to high operational cost ahead.

“We are witnessing margin compression in the company's outlook as a result of the moderation of year-to-date average crude palm oil (CPO) prices of RM5,240/tonne combined with the high fertiliser cost environment it operates in, which is made worse by minimum free float insufficiency.

“We thus reduce our rating to a neutral call with a revised target price of RM1.38 (down from RM2.60),” said the research firm.

Meanwhile, CGS-CIMB maintained a hold recommendation on FGV, with TP of RM1.40 per share as it remains concerned about the lack of details on the plantation company’s plans to rectify its non-compliance of public spread.

“Given the lack of details on this, we believe the overhanging risk of potential delisting and weaker FY2023 profit are likely to limit share price upside,” it said.

However, Kenanga Research maintained its market perform call on FGV with a lower TP by 10 per cent to RM1.40 and cut its FY2023-2024 net profit forecasts by 9-14 per cent.

“FGV’s 9M 2022 results disappointed as year-to-date realised average CPO price of RM4,989/tonne is set to soften along with seasonally weaker FFB output moving into the fourth quarter.

“The loss from the sugar division is also likely to continue beyond FY2022 into early FY2023,” it said.


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