Affin Research maintains Buy on FGV

KUALA LUMPUR: Affin Research has maintained its Add call on Felda Global Ventures (FGV) with a target price of RM4.98 based on 16 times CY14 earnings per share (EPS) plus the potential 4.4 sen EPS accretion from investing its massive cash reserves.

In a note on Thursday, Affin said FGV announced that its unit Felda Global Ventures Downstream has entered into a 40:60 joint venture and shareholders’ agreement with Lipid Venture to undertake the development, construction, fabrication and operation of a plant located in Kuantan to produce tocotrienol from refined bleached palm oil.

“The production capacity could rise to 70,000 kg per annum, making the JV one of the major producers of tocotrienol in South East Asia.

“The JV agreement are subject to conditions precedent as well as conditions subsequent, the latter including an option for FGV to raise its stake in the JV to 60% within the next two years,” it said.

Affin noted the JV agreements are subject to conditions precedent as well as conditions subsequent, the latter including an option for FGV to raise its stake in the JV to 60% within the next two years.

“The JV is expected to have an issued an paid-up capital of RM25mil. FGV added that the entry point project is part of the National Key Economic Area initiatives and a seed grant has been secured from Pemandu,” it said.

It added the JV would further tap on the extraction of more downstream products is positive in the long term but the research house does not expect the FY13-15 EPS forecasts to be significant.

“Based on a price of US$400/kg, the implied turnover at full production capacity of 70,000kg per annum is RM90mil,” it said.