PLANTATION

FGV HOLDINGS
(FGV MK, FGV.KL) 1 Dec 2021

Public shareholding spread, still an issue

Company report SELL
Gan Huey Ling, CFA (Maintained)
gan-huey-ling@ambankgroup.com
03 2036 2305 Rationale for report: Company results

Investment Highlights
Price RM1.48
Fair Value RM1.20
52-week High/Low RM1.67/RM1.16  We maintain SELL on FGV Holdings with a lower fair value
of RM1.20/share vs. RM1.25/share previously. Although
Key Changes FGV’s 9MFY21 net profit exceeded our forecast and
Fair value  consensus estimates, we believe that it would be difficult
EPS 
for FGV to maintain its profitability in FY22F due to lower
YE to Dec FY20 FY21E FY22F FY23F palm product prices and higher costs of production.

Revenue (RM mil)

Net Profit (RM mil)
14,075.7 18,322.5 17,111.9 17,360.6
146.2 714.6 444.8 202.6
 Our fair value for FGV is based on a FY23F PE of 22.0x. We
EPS (sen) 4.0 19.6 12.2 5.6 have used FGV’s FY23F net profit to arrive at its fair value
EPS growth (%) -159.4 388.9 -37.7 -54.5 instead of FY22F as the Malaysia corporate tax rate is
Consensus net (RM pmil) 364.0 295.1 286.4 expected to normalise to 24% in 2023F. We ascribe a three-
DPS (sen) 3.0 3.0 3.5 4.5
star ESG rating to FGV. Incidentally, the deadline for FGV
PE (x) 36.9 7.6 12.1 26.7
EV/EBITDA (x) 6.8 3.2 3.3 3.9 to resolve its public shareholding spread is 3 February
Div yield (%) 2.0 2.0 2.4 3.0 2022. FGV’s public shareholding spread is 13.19%
ROE (%) 3.4 14.7 8.6 3.9 currently.
Net gearing (%) 66.4 43.7 18.6 6.3

Stock and Financial Data  FGV’s 9MFY21 results were sharply above our forecast
and consensus estimates. We have raised FGV’s FY21E
Shares Outstanding (million) 3,648.2 net profit by 309.7% to account for a higher plantation
Market Cap (RM’mil) 5,399.3 EBIT margin. FGV’s gross profit improved by 51.6% QoQ
Book value (RM/share) 1.17
to RM827.4mil in 3QFY21 on the back of a 13.5% expansion
P/BV (x) 1.3
ROE (%) 3.4 in revenue.
Net Gearing (%) 66.4
 Plantation turnover increased by 15.0% QoQ to RM6.9bil in
Major Shareholders FELDA (34%) 3QFY21 underpinned by higher palm product prices and a
Felda Asset Holdings (12.4%)
6% increase in FFB production. Average CPO price
Free Float (%) 66.0 realised was RM3,798/tonne in 3QFY21 vs. RM3,333/tonne
Avg Daily Value (RM mil) 1.5 in 2QFY21.
Price performance 3mth 6mth 12mth
 Comparing 9MFY21 against 9MFY20, FGV reported a core
Absolute (%) -0.0 +9.0 +20.7 net profit (ex-land lease changes) of RM466.2mil compared
Relative (%) -3.7 -14.0 +24.6 with RM42.6mil. The earnings turnaround in 9MFY21 was
driven by MSM Malaysia’s improved profits and stronger
palm product prices. MSM benefited from higher selling
prices of refined sugar in 9MFY21.

 FGV’s average CPO price realised rose by 37.0% to

RM3,475/tonne in 9MFY21 from RM2,536/tonne in 9MFY20.
On a negative note, FGV’s FFB production declined by
10.0% YoY in 9MFY21. We attribute the fall in FFB output in
9MFY21 to the shortage in estate workers and wet weather
in Sabah in 1QFY21.
FGV Holdings 1 Dec 2021

EXHIBIT 1: EARNINGS SUMMARY (RM MIL)

9MFY20 9MFY21 YoY 2QFY21 3QFY21 QoQ

Revenue 10,066.9 13,391.0 33.0% 4,681.7 5,315.8 13.5%

Cost of sales (9,033.6) (11,665.6) 29.1% (4,136.0) (4,488.4) 8.5%
Gross profit 1,033.3 1,725.5 67.0% 545.8 827.4 51.6%

Other op income 63.9 76.5 19.7% 19.2 14.6 -24.2%

Selling & distribution (94.4) (139.2) 47.5% (39.6) (66.1) 66.7%
Admin expenses (601.4) (564.2) -6.2% (192.8) (192.7) -0.1%
Impairment on fin assets 13.9 (7.6) -154.6% 6.5 (7.2) -211.2%
Other op expenses (124.6) (28.6) -77.0% (13.2) (13.9) 5.5%
Other (losses)/gains, net 90.3 97.2 7.7% 12.5 73.5 488.2%
FV chg in land lease (257.0) (70.4) -72.6% 180.3 (107.0) -159.4%
Finance costs (126.4) (112.5) -11.0% (35.9) (44.0) 22.5%
Finance income 17.1 13.3 -21.8% 6.1 3.3 -45.3%
Share of results in assoc (0.1) 1.0 -989.1% 1.0 0.5 -44.1%
Share of results in JV 12.7 33.4 162.9% 11.5 19.7 71.1%

PBT 27.4 1,024.4 3633.7% 501.3 508.1 1.3%

Tax&zakat (76.7) (272.7) 255.4% (136.9) (107.0) -21.8%
Minority interest 64.4 (49.0) -176.1% (25.7) (1.6) -93.6%
Loss from discont ops

Net profit 15.1 702.8 4556.4% 338.8 399.4 17.9%

Core net profit ex LLA 42.6 466.2 97.7 369.8

EPS 0.4 19.3 4715.0% 9.3 11.0 17.9%

DPS - - - -
Source: Bursa Announcement

EXHIBIT 2 : ESG RATING

Overall ★ ★ ★
RSPO certification ★ ★
Supply chain auditing ★ ★
Migrant workers welfare ★ ★ ★
Fires ★ ★ ★
Work site safety ★ ★ ★
Corporate social responsibility ★ ★ ★
Corruption free pledge ★ ★ ★
Accessibility and transparency ★ ★ ★
We accord a discount/premium of -6%, -3%, 0%, +3% and +6% on fundamental fair
value based on the overall ESG rating as appraised by us, from 1-star to 5-star

AmInvestment Bank Bhd 2

FGV Holdings 1 Dec 2021

EXHIBIT 3: FINANCIAL DATA

Income Statement (RMmil, YE 31 Dec) 2019 2020 2021E 2022F 2023F

Revenue 13,259.0 14,075.7 18,322.5 17,111.9 17,360.6

EBITDA 489.4 1,094.4 2,209.5 1,819.8 1,356.3
Depreciation & amortisation 783.7 782.8 771.1 785.5 799.9
Operating income (EBIT) (294.4) 311.6 1,438.4 1,034.3 556.4
Other income, associates & JV 113.6 156.3 76.2 78.8 81.6
Net interest (158.1) (121.9) (140.4) (146.0) (144.0)
Exceptional items 0.0 0.0 0.0 0.0 0.0
Pretax profit (338.8) 346.1 1,374.2 967.1 494.1
Taxation (32.3) (211.9) (329.8) (290.1) (172.9)
Minorities/pref dividends 125.0 12.0 (329.8) (232.1) (118.6)
Loss from discont opes 0.0 0.0 0.0 0.0 0.0
Net profit (246.2) 146.2 714.6 444.8 202.6
Core net profit (299.27) 9.7 714.6 444.8 202.6

Balance Sheet (RMmil, YE 31 Dec) 2019 2020 2021E 2022F 2023F

Fixed assets 10509.9 10203.8 9832.7 9447.2 9047.3

Intangible assets 969.8 958.3 958.3 958.3 958.3
Other long-term assets 1580.3 1330.9 1281.8 1139.3 1101.1
Total non-current assets 13,060.0 12,493.0 12,072.8 11,544.8 11,106.7
Cash & equivalent 1617.6 1729.2 2811.7 3940.6 4544.3
Stock 1313.0 1192.6 2309.1 2156.6 2187.9
Trade debtors 1241.6 1438.8 1438.8 1438.8 1438.8
Other current assets 469.4 325.8 317.6 316.1 314.6
Total current assets 4641.7 4686.5 6877.3 7852.1 8485.6
Trade creditors 984.6 1153.6 1517.1 1447.3 1517.0
Short-term borrowings 3254.5 2633.6 2659.9 2606.7 2554.6
Other current liabilities 581.7 635.7 926.9 928.9 930.9
Total current liabilities 4820.8 4422.9 5103.9 4983.0 5002.5
Long-term borrowings 766.1 773.2 927.8 946.4 965.3
Other long-term liabilities 6014.5 5883.2 5883.2 5883.2 5883.2
Total long-term liabilities 6780.6 6656.4 6811.0 6829.6 6848.5
Shareholders' funds 4173.2 4261.7 4866.8 5184.0 5222.4
Minority interests 1927.1 1838.5 2168.3 2400.4 2519.0
BV/share (RM) 1.14 1.17 1.33 1.42 1.43

Cash Flow (RMmil, YE 31 Dec) 2019 2020 2021E 2022F 2023F

Pretax profit (338.8) 346.1 1,374.2 967.1 494.1

Depreciation 756.0 759.1 771.1 785.5 799.9
Net change in working capital 913.6 147.3 (832.5) (204.8) (132.1)
Others 644.7 503.2 422.8 386.0 263.5
Cash flow from operations 1,975.5 1,755.6 1,735.6 1,933.8 1,425.3
Capital expenditure (620.9) (435.5) (400.0) (400.0) (400.0)
Net investments & sale of fixed assets 0.4 4.8 0.0 0.0 0.0
Others 136.4 68.8 0.0 0.0 0.0
Cash flow from investing (484.1) (361.9) (400.0) (400.0) (400.0)
Debt raised/(repaid) (746.0) (887.6) (79.8) (295.5) (294.0)
Equity raised/(repaid) 0.0 0.0 0.0 0.0 0.0
Dividends paid (82.4) (164.8) (109.4) (109.4) (127.7)
Others (189.0) (237.2) 0.0 0.0 0.0
Cash flow from financing (1,017.4) (1,289.6) (189.3) (404.9) (421.7)
Net cash flow 474.0 104.1 1,146.3 1,128.9 603.6
Net cash/(debt) b/f 1,096.0 1,568.5 1,665.4 2,811.7 3,940.6
Forex (1.5) (7.2) 0.0 0.0 0.0
Net cash/(debt) c/f 1,568.5 1,665.4 2,811.7 3,940.6 4,544.3

Key Ratios (YE 31 Dec) 2019 2020 2021E 2022F 2023F

Revenue growth (%) -1.5 6.2 30.2 -6.6 1.5

EBITDA growth (%) -336.1 123.6 101.9 -17.6 -25.5
Pretax margins (%) -2.6 2.5 7.5 5.7 2.8
Net profit margins (%) -1.9 1.0 3.9 2.6 1.2
Interest cover (x) 3.1 9.0 15.7 12.5 9.4
Effective tax rate (%) 9.5 -61.2 -24.0 -30.0 -35.0
Net dividend payout (%) -29.6 74.9 15.3 28.7 81.0
Debtors turnover (days) 34 37 39 39 39
Stock turnover (days) 36 31 46 46 46
Creditors turnover (days) 30 33 36 36 36

Source: Company, AmInvestment Bank estimates

AmInvestment Bank Bhd 3

FGV Holdings 1 Dec 2021

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AmInvestment Bank Bhd 4