FGV’s voluntary cash offer for Asian Plantations is expected to be short-term earnings dilutive but long-term positive.
Its new biodiesel plant investment will be long-term positive but neutral on earnings in the short term.
Maintain HOLD on FGV with unchanged SOP-based TP of MYR3.97.
Separately, FGV has entered into a SPA with two JV partners to acquire a biodiesel plant from Mission Biofuels SB for USD22.5m (MYR71m). This plant will be refurbished and retrofitted, and raise its total project cost for the JV company to USD47.5m (MYR150m). FGV will own 60%-stake in the JV company. The above two deals are targeted for completion in 4Q14.
Source: Maybank Research - 2 Sep 2014
Its new biodiesel plant investment will be long-term positive but neutral on earnings in the short term.
Maintain HOLD on FGV with unchanged SOP-based TP of MYR3.97.
What’s New
FGV has launched a voluntary conditional cash offer for Asian Plantations (APL, an AIM listed company in London) at GBP2.20/sh and this may cost FGV up to MYR628m. The offer is conditional on FGV obtaining at least 75% of the shares and it does not intend to maintain the listing status of APL. The acquisition will be funded by its IPO cash proceeds. APL has 24,622 ha of land in Sarawak, with 12,161 ha of oil palm planted area (as at 31 Dec 2013). We understand its latest planted area is ~16k ha (of which ~5.2k ha are mature estates) with a remaining unplanted area of ~6k ha.Separately, FGV has entered into a SPA with two JV partners to acquire a biodiesel plant from Mission Biofuels SB for USD22.5m (MYR71m). This plant will be refurbished and retrofitted, and raise its total project cost for the JV company to USD47.5m (MYR150m). FGV will own 60%-stake in the JV company. The above two deals are targeted for completion in 4Q14.
What’s Our View
Given limited details, we estimate that the APL offer price of GBP2.20/sh represents 3.9x of APL’s NAV and translates to an EV/ha of ~MYR63k per planted hectare; which is a typical valuation for prime mature estates in Sarawak. Since APL’s estates are largely immature (68% of planted area) and loss making (in 2013), we believe FGV is paying a 25% premium for APL. It is expected to be short-term earnings dilutive but long-term positive given the scarcity of land in the region and amid uncertain investment policies in Indonesia. As for its biodiesel investment, the deal is long-term positive although neutral on earnings in the short term.Source: Maybank Research - 2 Sep 2014
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