couchcorp
Fun Poster
- Messages
- 767
- Joined
- Apr 7, 2011
- Messages
- 767
- Reaction score
- 41
- Points
- 20
All required disclosure and analyst certification appear on the last two pages of this report. Additional information is available upon
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(Member of Alliance Bank group)
PP7766/03/2013 (032116)
8 October 2012
More earnings downside ahead
With CPO prices expected to trend lower going forward, we see more downside to FGV’s forward earnings. As such, we trim our estimates by another 10% and are factoring in a CPO ASP of RM2,900/mt for FY12 and FY13. FGV continues to trade at a premium to peers and market which is untenable. With the impending expiry of the lock up period for cornerstone investors in late December, more share price weakness is expected ahead. Maintain SELL.
Lower CPO ASP expectations going forward
We initially had a RM3,100/mt CPO ASP for FGV for FY12 and FY13. Given recent weakness in CPO prices and coupled with our view that CPO prices will continue to be lukewarm going into 2013 due to slower global demand, we are downgrading our CPO ASP. As it is, 3Q12 CPO spot prices have averaged at RM2,850/mt, lower than our estimates.
We expect prices to rebound from October onwards and average at RM2,700/mt for 4Q12. As such we lower our CPO ASP for the group to RM2,900/mt from RM3,100/mt previously. We also lower our FY13 CPO ASP from RM3,000/mt to RM2,900/mt.
Impact on earnings
Earnings for FY13 and FY14 are adjusted downwards by 10.9% and 10.1% respectively. We make no changes to our outlook on FFB yields or cost assumptions.
To note, the group has so far reported that production for August is down 10% m-o-m after July numbers came in positive at +11.3% m-o-m. Some recovery is expected in September but production in total for FY12 will likely be lower by 6.1% y-o-y.
We highlight that FGV is more sensitive to changes in CPO prices than peers as the group has large milling operations at their associate company, Felda Holdings Bhd.
Maintain Sell
We maintain our Sell call on FGV, with a slightly lower TP of RM3.53 from RM3.93 previously. Our TP is derived from pegging FY13 EPS to a P/E multiple of 15x which is 1 standard deviation below the long term average P/E of large cap peers Sime Darby, KL Kepong and IOI Corp.
With our expectation that FGV’s earnings will be on the decline for the next 3 financial years, we view that FGV’s valuations continue to be expensive when compared to peers. FGV trades at a forward P/E of >20x, which is above their peers (Sime Darby, KLK and IOI) long term average of 17.2x. With earnings prospects of FGV being poorer compared to peers due to their aged hectarage and heavy replanting activities, we opine the group should trade at discount to peers, rather than at a premium.
We also opine that premium valuation on the basis of impending inclusion in the FBMKLCI in December is also not tenable as investors would be better off invested in Sime Darby, IOI and KLK, all of which have larger free float and lower relative valuation.
Felda Global Ventures Sell
Plantation Bloomberg Ticker: FGV MK | Bursa Code: 5222
Company Update
Analyst
Team Coverage
[email protected]
+603 2604 3909
12-month upside potential
Previous target price
3.93
Revised target price
3.53
Current price (as at 5 Oct)
4.75
Capital upside (%)
-25.7
Net dividends (%)
1.7
Total return (%)
-24.0
Key stock information
Syariah-compliant?
Yes
Market Cap (RM m)
17,328.7
Shares outstanding (m)
3,648.2
Free float (%)
37.7
52-week high / low (RM)
5.44 / 4.50
3-mth avg volume ('000)
7,906.3
3-mth avg turnover (RM m)
39.4
Share price performance
1M
3M
6M
Absolute (%)
-0.9
-11.4
N/A
Relative (%)
-2.1
-13.3
N/A
Share price chart
Major shareholders %
FELDA 23.0
FAHC 17.0
Company Update | Felda Global Ventures | 8 October 2012
2
SNAPSHOT OF FINANCIAL AND VALUATION METRICS
Figure 1 : Key financial data
FYE 31 Dec
FY10
FY11
FY12F
FY13F
FY14F
Revenue (RM m)
5,804.6
7,474.8
12,296.2
12,401.0
12,873.1
EBITDA (RM m)
1,078.8
1,325.4
1,286.7
1,347.6
1,366.2
EBIT (RM m)
957.1
1,199.8
1,132.5
1,144.4
1,127.9
Pretax profit (RM m)
1,184.4
1,372.0
1,262.6
1,303.5
1,312.1
Reported net profit (RM m)
932.0
942.2
814.8
839.7
842.2
Core net profit (RM m)
980.1
1,149.7
814.8
839.7
842.2
EPS (sen)
25.3
25.6
22.1
22.8
22.9
Core EPS (sen)
26.6
31.2
22.1
22.8
22.9
Alliance / Consensus (%)
75.5
70.0
70.0
Core EPS growth (%)
150.8
17.3
(29.1)
3.0
0.3
P/E (x)
17.9
15.2
21.5
20.8
20.8
EV/EBITDA (x)
16.2
14.5
13.6
13.7
14.1
ROE (%)
-
79.5
15.1
14.5
13.5
Net gearing (%)
-
77.8
(17.3)
(3.0)
8.8
Net DPS (sen)
-
-
8.3
8.5
8.6
Net dividend yield (%)
-
-
1.7
1.8
1.8
BV/share (RM)
3.40
4.00
1.46
1.58
1.69
P/B (x)
-
14.8
3.2
3.0
2.8
Source: Alliance Research, Bloomberg
Figure 2 : 12-month forward P/E trend
Figure 3 : 12-month forward P/B trend
Source: Alliance Research, Bloomberg
Source: Alliance Research, Bloomberg
Figure 4 : Peer comparison
Company
Call
Target price (RM)
Share price (RM)
Mkt Cap (RM m)
EPS Growth (%)
P/E (x)
P/BV (x)
ROE (%)
Net Dividend Yield (%)
CY12
CY13
CY12
CY13
CY12
CY13
CY12
CY13
CY12
CY13
Sime Darby
Neutral
9.95
9.65
57,991.3
3.8
0.8
14.3
14.2
2.2
2.0
15.3
14.4
3.2
3.2
IOI Corporation
Neutral
4.48
5.07
32,594.8
-2.3
1.3
18.2
18.0
2.5
2.4
13.7
13.1
3.2
3.1
Kuala Lumpur Kepong
Neutral
22.80
21.42
22,866.0
-10.2
11.4
20.2
18.1
3.1
2.9
14.8
15.5
3.0
3.3
Felda Global Ventures
Sell
3.53
4.75
17,328.7
-29.1
3.0
21.5
20.8
3.2
3.0
15.1
14.5
1.7
1.8
Genting Plantations
Neutral
9.47
8.97
6,806.9
-10.5
2.9
17.2
16.7
1.9
1.8
11.2
10.5
1.2
1.3
IJM Plantations
Buy
3.72
3.20
2,565.5
-6.3
13.5
18.0
15.9
1.8
1.6
9.7
10.2
3.1
3.1
Kim Loong Resources
Neutral
2.65
2.34
722.2
37.2
-8.5
7.7
8.5
1.4
1.3
18.2
15.9
5.8
6.6
Average
-4.6
2.7
16.7
16.2
2.5
2.4
14.5
14.0
2.9
2.9
Source: Alliance Research, Bloomberg Share price date: 5 Oct 2012
2021222324252012P/E (x)P/EAverage P/E+1/-1 SD+2/-2 SD2.82.93.03.13.23.33.43.52012P/BV (x)P/BVAverage P/BV+1/-1 SD+2 / -2 SD
Company Update | Felda Global Ventures | 8 October 2012
3
Figure 5 : Revision to estimates and earnings
Previous estimates
Revised estimates
% change to estimates
2012F
2013F
2014F
2012F
2013F
2014F
2012F
2013F
2014F
CPO ASP (RM / MT)
3,100
3,100
3,000
2,900
2,900
3,000
-6.5
-6.5
0.0
FFB yield (MT / ha)
19.3
19.6
20.4
19.3
19.6
20.4
0.0
0.0
0.0
EPS (sen)
24.83
25.35
22.86
22.1
22.8
22.9
-10.9
-10.1
0.0
Source: Alliance Research
Figure 6 : FFB production performance
Company
Sime
KLK
IOI
FGV
GenP
IJMP
KimL
M-o-m Production growth
May
8.8%
6.0%
5.2%
-
3.8%
6.8%
-8.4%
June
10.0%
6.3%
-2.2%
-
5.5%
0.1%
7.9%
July
14.1%
13.1%
21.3%
11.3%
20.0%
27.1%
15.6%
August
-6.4%
-8.8%
4.5%
-10.4%
2.2%
10.0%
14.5%
Y-o-y production growth
May
-17.0%
-17.9%
-27.3%
-
-27.6%
-39.0%
-48.1%
June
-8.4%
-11.1%
-33.6%
-
-21.9%
-45.7%
-47.1%
July
4.6%
-3.8%
-17.0%
-
-8.3%
-31.6%
-30.3%
August
6.2%
-0.6%
-9.0%
-
6.1%
-18.0%
-15.5%
YTD y-o-y production growth
6M12
-11.9%
-8.5%
-18.0%
-
-13.2%
-17.4%
-26.1%
7M12
-9.3%
-7.7%
-17.8%
-
-12.4%
-20.2%
-26.7%
8M12
-7.4%
-6.8%
-16.6%
-
-10.0%
-3.7%
-25.3%
Source: Company
Figure 7 : Correlation matrix
Correlation Matrix
CPO
Sime
IOI
KLK
GenP
IJMP
THP
CPO
1.00
0.40
0.26
0.32
0.31
0.19
0.28
Sime
0.40
1.00
0.53
0.45
0.44
0.27
0.26
IOI
0.26
0.53
1.00
0.45
0.36
0.27
0.15
KLK
0.32
0.45
0.45
1.00
0.39
0.47
0.41
GenP
0.31
0.44
0.36
0.39
1.00
0.21
0.33
IJMP
0.19
0.27
0.27
0.47
0.21
1.00
0.33
THP
0.28
0.26
0.15
0.41
0.33
0.33
1.00
Source: Alliance Research
Company Update | Felda Global Ventures | 8 October 2012
4
Felda Global VenturesFinancial SummaryBalance SheetIncome StatementFY 31 Dec (RM m)2010A2011A2012F2013F2014FFY 31 Dec (RM m)2010A2011A2012F2013F2014FPPE- 1,704 2,050 2,701 3,166 Revenue5,8057,47512,29612,40112,873Investment properties- - - - - EBITDA1,0791,3251,2871,3481,366Property development- 11 11 11 11 Depreciation & amortisation(122)(126)(154)(203)(238)Inventories- 464 1,348 1,359 1,411 EBIT9571,2001,1321,1441,128Receivables- 2,943 3,371 3,378 3,410 Net interest expense(139)(103)(79)(60)(63)Other assets- 4,307 4,485 4,680 4,903 Share of associates391329178195223Deposit, bank and cash- 1,723 3,426 2,512 1,640 Pretax profit1,1841,3721,2631,3031,312Total Assets- 11,152 14,690 14,641 14,541 Taxation(255)(357)(316)(326)(328)Minority interest3(72)(132)(138)(142)LT borrowings- 1,883 1,830 1,777 1,724 Net profit932942815840842ST borrowings- 762 662 562 462 Adj net profit9801,150815840842Payables- 505 403 406 422 Other liabilities- 5,994 5,452 4,996 4,470 Key Statistics & RatiosLiabilities- 9,144 8,347 7,741 7,078 FY 31 Dec2010A2011A2012F2013F2014FShare capital- 2,668 3,684 3,684 3,684 GrowthReserves- (1,483) 1,703 2,123 2,544 Revenue101.5%28.8%64.5%0.9%3.8%Shareholders' equity- 1,185 5,387 5,807 6,228 EBITDA482.2%22.9%-2.9%4.7%1.4%Pretax profit152.9%15.8%-8.0%3.2%0.7%Minority interest- 823 955 1,093 1,235 Adj Net profit150.8%17.3%-29.1%3.0%0.3%Total Equity- 2,008 6,343 6,900 7,463 Adj EPS150.8%17.3%-29.1%3.0%0.3%Total Equity and Liabilities- 11,152 14,690 14,641 14,541 ProfitabilityEBITDA margin18.6%17.7%10.5%10.9%10.6%Net profit margin16.1%12.6%6.6%6.8%6.5%Cash Flow StatementEffective tax rate32.2%34.3%25.0%25.0%25.0%FY 31 Dec (RM m)2010A2011A2012F2013F2014FReturn on assets-8.4%5.5%5.7%5.8%Return on equity-79.5%15.1%14.5%13.5%Pretax profit- 1,372 1,263 1,303 1,312 Depreciation & amortisation- 126 154 203 238 LeverageChange in working capital- (3,743) (1,413) (15) (69) Total debt / total assets-0.240.170.160.15Net interest received / (paid)- (141) (115) (108) (101) Total debt / equity-2.230.460.400.35Tax paid- (357) (316) (326) (328) Net debt / equity-0.78-0.17-0.030.09Others- 354 389 413 394 Operating Cash Flow- (2,390) (38) 1,470 1,447 Key DriversFY 31 Dec (RM m)2010A2011A2012F2013F2014FCapex- - (1,000) (1,200) (1,000) Others- 130 115 108 101 CPO ASP Malaysia (RM/mt)--2,9002,9003,000Investing Cash Flow- 130 (885) (1,092) (899) FFB Matured Yield (mt/ha)--19.319.620.4Issuance of shares- 4,227 - - ValuationChanges in borrowings- (542) (153) (153) (153) FY 31 Dec2010A2011A2012F2013F2014FDividend paid- (61) (407) (420) (421) Others- - (457) (526) (530) EPS (sen)25.325.622.122.822.9Financing Cash Flow- (603) 3,209 (1,099) (1,104) Adj EPS (Sen)26.631.222.122.822.9P/E (x)17.915.221.520.820.8Net cash flow- (2,863) 2,287 (720) (556) EV/EBITDA (x)16.214.513.613.714.1Forex- (0) - - - Beginning cash- 4,587 1,723 3,424 2,492 Net DPS (sen)--8.38.58.6Ending cash- 1,723 3,424 2,492 1,597 Net dividend yield--1.7%1.8%1.8%BV per share (RM)-0.321.461.581.69P/BV(x)-14.83.23.02.8Price Date: 14 September 2012
Company Update | Felda Global Ventures | 8 October 2012
5
DISCLOSURE
Stock rating definitions
Strong buy - High conviction buy with expected 12-month total return (including dividends) of 30% or more
Buy - Expected 12-month total return of 15% or more
Neutral - Expected 12-month total return between -15% and 15%
Sell - Expected 12-month total return of -15% or less
Trading buy - Expected 3-month total return of 15% or more arising from positive newsflow. However, upside may not be
sustainable
Sector rating definitions
Overweight - Industry expected to outperform the market over the next 12 months
Neutral - Industry expected to perform in-line with the market over the next 12 months
Underweight - Industry expected to underperform the market over the next 12 months
Commonly used abbreviations
Adex = advertising expenditure
EPS = earnings per share
PBT = profit before tax
bn = billion
EV = enterprise value
P/B = price / book ratio
BV = book value
FCF = free cash flow
P/E = price / earnings ratio
CF = cash flow
FV = fair value
PEG = P/E ratio to growth ratio
CAGR = compounded annual growth rate
FY = financial year
q-o-q = quarter-on-quarter
Capex = capital expenditure
m = million
RM = Ringgit
CY = calendar year
M-o-m = month-on-month
ROA = return on assets
Div yld = dividend yield
NAV = net assets value
ROE = return on equity
DCF = discounted cash flow
NM = not meaningful
TP = target price
DDM = dividend discount model
NTA = net tangible assets
trn = trillion
DPS = dividend per share
NR = not rated
WACC = weighted average cost of capital
EBIT = earnings before interest & tax
p.a. = per annum
y-o-y = year-on-year
EBITDA = EBIT before depreciation and amortisation
PAT = profit after tax
YTD = year-to-date
Company Update | Felda Global Ventures | 8 October 2012
6
DISCLAIMER
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tak paham la..bertaburan data yg dipostkan..klu bleh kasi link atau attached the original doc lagi cntek Tuan/Puan
