HLIB Maintains Hold On FGV
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
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Focus Malaysia
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