HDBSVR initiates coverage of FGVH with a Hold (5222)

KUALA LUMPUR: Hwang DBS Vickers Research (HDBSVR) has initiated coverage of Felda Global Ventures Holdings (FGVH) with a Hold call and target price of RM5.05.
"At
the current price FGVH offers limited upside to our discounted
cashflow-based TP of RM5.05, which implies 18 times FY13 PE. However,
we like the counter for its steady cash flow and 50% dividend payout
policy, which implies a decent 3.9% yield," it said on Thursday.
HDBSVR
said FGVH's 99-year land lease agreement for 355,864 ha of plantation
land (from Felda) positions the group as the world's thirdrd largest
oil palm planter.
Approximately 83% of FGVH's land area is
mature; and the remainder is expected to progressively come to maturity
over the next few years. FGVH is also replanting about15,000 ha per
annum to maintain/improve its age profile.
The research house said FGVH's 49%-associate Felda Holdings Bhd (FHB)
complements the group's upstream operations with milling and downstream
businesses. FGVH has access to FHB's 3.3 million tonnes of CPO (that is
7% of global supply).
"We believe this provides FGVH large
economies of scale cost-wise," it said. HDBSVR said FGVH is in net cash
position; and plans to undertake aggressive expansion, especially to
acquire plantation land bank.
"Its improving operational
efficiency should also help to propel growth, given its large FFB base.
FGVH intends to raise its sugar output and storage capacity, as well as
to expand downstream via strategic overseas partnerships," it said.