FGV share price surged 24% last month

The company is currently valued at RM4b based on yesterday’s market capitalisation


SHARE price of FGV Holdings Bhd has jumped 24.02% last month as feel good factors are fuelling investors’ confidence, and the planter has exorcised its dark days.

Yesterday, the planter — which is 33.7%-owned by Federal Land Development Authority (Felda) — rose 6.7%, more than 12 times the FTSE Bursa Malaysia KLCI to close at RM1.11 after dropping to 84.5 sen early this month.

The company is currently valued at RM4.05 billion based on yesterday’s market capitalisation.

FGV’s trading volume for the day was more than doubled the 20-day average.

Rakuten Trade Sdn Bhd research VP Vincent Lau said there are many factors behind FGV share price rise.

“The worst is over for FGV and we expect its earnings to improve. The outlook for plantation sector is also positive — the Bursa Malaysia Plantation Index (KLPL) is growing and the crude palm oil (CPO) price is expected to be better in the second half of the year (2H19).

“The positive news on Felda have also boosted investors’ confidence,” he told The Malaysian Reserve.

During the tabling of Budget 2020 last week, Finance Minister Lim Guan Eng said the government will allocate RM810 million for the welfare of Felda community — including RM250 million for an income enhancement programme benefitting 11,600 settlers; RM300 million to write-off the interest of the settlers’ debts; RM100 million for the Felda water supply projects; RM70 million for housing the new generation of Felda settlers; and RM90 million for the upgrading of Felda roads and basic infrastructure.

Recently, the Economic Affairs Ministry also said it would inject RM6.23 billion of financial aid in tranches for the agency to cope with its increasing debt.

“Investors are bargain hunting now. The rumours that Tan Sri Syed Mokhtar Albukhary is planning to buy a 20% stake in FGV has also played a part in the rise of the share price and interest in the company,” Lau said.

On Sept 24, FGV has clarified that the group is unaware of the speculated proposals from the tycoon.

In the 1H19, FGV’s net loss more than doubled to RM55.57 million from the RM22.3 million net loss posted in the corresponding period last year.

The drop was largely due to the weaker CPO prices and losses incurred by its sugar business. Despite the losses, FGV noted improvements in both its fresh fruit bunches production and yield as the planter pushed for its transformation agenda.

The company is also looking to bring in a strategic equity partner to help its sugar operations under MSM Malaysia Holdings Bhd. In June, FGV’s shareholders voted against the total RM5.74 million payout announced for the company’s directors in respect to financial year 2018 (FY18).

FGV recorded RM1.08 billion in net losses for FY18. Some reports suggested that Felda may review its land lease agreement (LLA) with FGV.

FGV entered into an LLA with Felda in November 2011, which saw 351,000ha of Felda’s land leased to FGV for a period of 99 years. In return, FGV agreed to pay an annual fixed lease payment of RM248 million and a 15% share of the operating profits from the LLA land.

But FGV was not the only planter that registered gains and added to the KLPL. IOI Corp Bhd contributed the most to the index advance.

Meanwhile, Sime Darby Plantation Bhd was the biggest drag to the index, declining 1.03% and Gopeng Bhd had the biggest drop, falling 9.86%. KLPL rose 0.58% or 38.68 points to close at 6,673.82 points yesterday.