HLIB Maintains Hold On FGV
Hong Leong Investment Bank Bhd (HLIB) Research has maintained a HOLD call on FGV Holdings Bhd with an unchanged target price of RM1.26, following the group's move to acquire full ownership of eight subsidiaries from Koperasi Permodalan Felda Malaysia Bhd (KPF) for RM229.8 million.
The house noted that while the earnings uplift from the acquisitions is likely to be limited—especially after accounting for funding costs—the move enhances FGV's operational control, improves decision-making agility and aligns better with its long-term strategic goals. HLIB has kept its earnings forecasts unchanged for now, pending further updates from FGV's upcoming results briefing scheduled for 28 May 2025.
The acquisitions involve remaining minority stakes in key units including a 16.67% stake in FGV Kernel Products for RM12.9 million, a 33.33% stake in FGV Refineries for RM17.9 million, and a 49% stake in FGV Transport Services for RM77.9 million, among others. The transaction will be funded via a mix of internal funds and bank borrowings, and is expected to be completed by the third quarter of 2025.
HLIB stated that based on FY2024 earnings, the acquisitions are not expected to contribute significantly to bottom-line growth. However, the analyst added that the initiative may support long-term gains by streamlining management efficiency across the group's downstream and support businesses.
On the balance sheet, the impact is anticipated to be modest, with net gearing projected to rise slightly from 0.27 times as at 31 December 2024 to 0.31 times post-acquisition.
At the current share price of RM1.28, FGV is trading at a slight premium to HLIB's target price, with a projected capital downside of 1.3%. The expected total return is marginal at 0.3%, supported by a 1.6% dividend yield.
Despite recent share price gains, HLIB believes the stock remains fairly valued, given muted earnings visibility and potential margin pressures in its core plantation segment. The research house will revisit its outlook following the management's briefing later this month. Related
Try Our AI Features
Explore what Daily8 AI can do for you:
Comments
No comments yet...
Related Articles
BusinessToday
20 hours ago
- BusinessToday
Analysts Downgrade Genting Malaysia, After Sharp Drop In Q1 Profits
CIMB Investment Bank Bhd (CIMB Securities) has downgraded Genting Malaysia Bhd (GENM) to HOLD from Buy, with a sharply lower target price of RM1.95 from RM2.45, while Hong Leong Investment Bank (HLIB) has reiterated its HOLD call with a revised target price of RM1.82, as both research houses flagged significant earnings pressure from weaker-than-expected performance across domestic and international operations. GENM's core net profit for the first quarter of FY25 fell 78% year-on-year to RM52 million, which CIMB said was impacted by a broad-based earnings decline across Resorts World Genting (RWG), the US, and UK segments, compounded by higher net interest cost and an elevated effective tax rate. The results were well below expectations, coming in at only 9% and 8% of CIMB Securities' and consensus full-year forecasts, respectively. HLIB similarly noted that GENM's RM31.1 million core profit for the quarter missed its projection by a wide margin, at just 6% of its FY25 estimate. RWG's gross gaming revenue (GGR) was a key concern, declining 7% year-on-year and 9% quarter-on-quarter, driven mainly by a significant drop in VIP play, which fell 18% year-on-year. Although mass market GGR grew by 7%, it was not enough to offset the overall weakness. CIMB Securities highlighted that hilltop visitations dipped 2% year-on-year, likely impacted by the earlier timing of Hari Raya compared to 2024, which affected non-gaming activities. Meanwhile, EBITDA for the group fell 11% year-on-year to RM869 million, with EBITDA margins shrinking to 31.9%. In the US and Bahamas, EBITDA contracted 22% year-on-year, pressured by higher labour costs and a weaker US dollar against the ringgit. In the UK and Egypt, earnings fell 25% year-on-year under similar conditions, though they were flat quarter-on-quarter. Share of associate losses from Empire Resorts also widened sequentially. HLIB noted that while revenue in the US & Bahamas rose 8.6% quarter-on-quarter, group-wide earnings recovery was insufficient to match past performance due to structural headwinds in international markets. CIMB Securities revised its core earnings estimates down by 37–39% for FY25–27, expecting a 29% drop in FY25 earnings before a modest 12% recovery in FY26, aided by anticipated tourist inflows during Visit Malaysia Year. HLIB likewise slashed its forecasts by 36–40%, citing persistently high finance costs, tax burdens and operating volatility in the US. Despite the earnings headwinds, both brokers pointed out GENM's dividend yields remain relatively attractive at 5.5–6.6% over FY25–27. However, CIMB Securities stressed that valuation at an FY25 EV/EBITDA of 8.3x is only modestly attractive, trading at a 12% discount to its 10-year pre-COVID average. Upside risk remains in the form of a possible full casino licence in Downstate New York, which CIMB Securites estimates could add 40–50 sen to its target price. GENM shares closed at RM1.82 on 30 May, giving the group a market capitalisation of RM10.26 billion. Related
Malaysian Reserve
2 days ago
- Malaysian Reserve
FGV minority shareholders should agree to RM1.30
Investors face tough choice amid weak outlook, fair value bid by RUPINDER SINGH FGV Holdings Bhd is once again in the spotlight with the Federal Land Development Authority's (Felda) renewed attempt to privatise the plantation giant. This time, minority shareholders should seriously consider accepting the RM1.30 per share offer — not only because it reflects fair value under current market and operating conditions, but also because the company's long-term structural issues and volatile earnings profile offer little reason to hold on. Felda, which currently owns 86.93% of FGV shares through direct and indirect holdings, has launched an unconditional voluntary takeover offer to acquire the remaining shares it does not already own. If successful in securing at least 90% of the total share capital, Felda will trigger a compulsory acquisition under the Capital Markets and Services Act 2007 and proceed to delist the company from Bursa Malaysia. The offer, priced at RM1.30 per share, is the same level Felda offered back in 2020 during its first privatisation attempt. While that offer ultimately failed to reach the required threshold, several key dynamics have changed since then — making the current bid more likely to succeed and more compelling to minority shareholders. FGV was once a high-flying IPO story. When it listed on Bursa Malaysia in June 2012, it raised RM10.4 billion, with shares priced at RM4.55 apiece. With a total of 3.65 billion shares issued, the listing valued FGV at a staggering RM16.6 billion, making it the second-largest IPO globally that year after Facebook. The offering was hailed as a major milestone for Malaysia's palm oil industry and Felda's transformation ambitions. More than a decade later, that promise has largely faded. FGV's shares last closed at RM1.28 — more than 70% below its IPO price — reflecting chronic structural inefficiencies, volatile earnings, governance setbacks and missed downstream integration targets. For many long-time investors, the privatisation offer now represents a pragmatic way out of a disappointing investment. Felda's current move echoes its December 2020 attempt, when it triggered a mandatory general offer after acquiring shares from The Retirement Fund Inc (KWAP) and Urusharta Jemaah Sdn Bhd (UJSB). Despite several extensions to the offer period, the bid ultimately failed to reach the 90% acceptance level required for delisting. However, conditions at the moment are more favourable for Felda. Notably, in March 2025, Bursa Malaysia rejected FGV's application for additional time to rectify its low public shareholding, leaving the company in breach of listing requirements and giving Felda a firm rationale to relaunch its takeover effort. Public shareholding now stands below 13%, limiting trading liquidity. This raises the likelihood of offer acceptance, particularly as the remaining minority shareholders face a shrinking market with few institutional buyers. Both Hong Leong Investment Bank (HLIB) and BIMB Securities Sdn Bhd recommend acceptance. HLIB has revised its target price to RM1.30 from RM1.26, in line with Felda's offer. BIMB sees the offer as fair, noting it represents an 8.5% premium over its in-house fair value of RM1.20 and a 10% premium to the one-year volume weighted average price (VWAMP). At RM1.30 per share, the offer translates to a forward price-to-earnings (P/E) ratio of about 13.2 times–15 times for financial year 2025 (FY25)-FY27 and a price-to-book (P/B) multiple of 0.78 times — reasonable when compared to FGV's five-year historical average P/B of 0.9 times. Earnings outlook remains muted. FGV's core net profit is projected to decline from RM453.8 million in FY24 to RM346.2 million in FY25 and RM316.5 million in FY26. EBITDA margins are expected to range between 6.3% and 6.6%, reflecting persistent cost pressures and operational headwinds, particularly in the downstream segment. Dividend yields, while modest, are projected to fall to 1.6% in FY25 and FY26 based on HLIB's estimates. BIMB is slightly more optimistic, expecting yields closer to 4.2% based on higher dividend per share assumptions. Regardless, neither projection makes a strong case for upside from holding out. Felda's intention to gain full control of FGV is part of a broader strategy to consolidate its plantation-related assets and unlock operational synergies. By delisting FGV, Felda gains more flexibility to undertake structural reforms, reduce overlapping functions and implement its Settlers Development Programme (SDP) without the constraints of quarterly reporting and minority shareholder scrutiny. The SDP aims to modernise Felda's agricultural model and improve settler incomes through diversification and sustainability. Full ownership of FGV would allow Felda to better align the company's upstream and downstream assets with these long-term goals. It also provides the opportunity to address governance and cost issues that have long hampered FGV's performance — challenges that are difficult to tackle with fragmented public ownership. For investors considering rejecting the offer, the risks are real. Should Felda succeed in breaching the 90% threshold, dissenting shareholders will likely face a compulsory acquisition. If the threshold isn't met, liquidity will deteriorate further and the stock may trade in a tight band with limited institutional interest. The chance of a meaningful re-rating appears remote, particularly in the absence of strong palm oil price tailwinds or significant internal restructuring both of which are unlikely in the short term. FGV's privatisation may not deliver IPO-level returns, but it represents a realistic and fair exit for investors. The RM1.30 offer reflects current valuations and market sentiment while allowing Felda to execute its vision for agricultural reform and settler empowerment. From a capital markets standpoint, the delisting is now not only inevitable — it is necessary. Minority shareholders would be wise to take the offer and move on, closing a long and often difficult chapter in one of Malaysia's most watched listings. This article first appeared in The Malaysian Reserve weekly print edition
The Star
5 days ago
- The Star
Bursa Malaysia lower at midday amid cautious sentiment, heavyweight selling
KUALA LUMPUR: Bursa Malaysia was lower at midday, dragged down by selling in selected utilities, consumer products and services heavyweight counters, amid lingering cautious sentiment surrounding global trade tariffs. At 12.30 pm, the FTSE Bursa Malaysia KLCI (FBM KLCI) eased by 1.30 points, or 0.08 per cent, to 1,517.68 from Thursday's close of 1,518.98. The benchmark index opened 2.24 points higher at 1,521.22, fluctuating between 1,513.42 and 1,522.06 throughout the morning session. On the broader market, decliners thumped gainers 559 to 258, while 363 counters were unchanged, 1,214 untraded and 86 suspended. Turnover stood at 1.55 billion units worth RM1.27 billion. Hong Leong Investment Bank Bhd, in a note today, said sentiment remained fragile amid persistent foreign outflows, earnings headwinds, and speculation over a potential cabinet reshuffle following the resignations of the minister of economy and the minister of natural resources and environmental sustainability. "Adding to the cautious tone are renewed concerns over a tariff-driven global slowdown and ongoing legal tussles surrounding US President Donald Trump's trade policies, which could weigh on market confidence and pressure Malaysia's growth and earnings outlook,' it said. It was reported that Trump's reinstatement of tariffs, upheld by a US appeals court, could eventually be challenged in the Supreme Court to overturn the initial federal court ruling. Among heavyweights, Maybank erased three sen to RM9.84, Tenaga slipped eight sen to RM14.00, while IHH Healthcare was flat at RM6.91. Public Bank increased one sen to RM4.32, and CIMB rose five sen to RM6.93. In active trade, Eco Shop and Nationgate gained six sen each to RM1.25 and RM1.50, respectively. KPJ Healthcare fell by 21 sen to RM2.75, Tanco eased one sen to RM1.03, and Cape EMS shed two sen to 21.5 sen. On the index board, the FBM Emas Index shaved 35.92 points to 11,346.41, the FBMT 100 Index lost 32.18 points to 11,109.83, and the FBM ACE Index decreased 41.40 points to 4,550.76. The FBM Emas Shariah Index slipped 55.84 points to 11,309.99, while the FBM 70 Index sank 136.93 points to 16,195.38. Sector-wise, the Financial Services Index added 13.42 points to 17,906.99, the Industrial Products and Services Index edged down 0.51 of-a-point to 152.51, the Energy Index eased 3.09 points to 705.09, and the Plantation Index fell 11.54 points to 7,282.41. - Bernama
