Results Note

31 May 2021

FGV Holdings Berhad MARKET PERFORM ↔ Price: RM1.34 Deemed Within Expectations Offer Price: RM1.30 ↔ By Adrian Kok l [email protected]

We deem 1QFY21 CNL of RM25.7m as within our/consensus’ Share Price Performance expectations in anticipation of sequential earnings improvements on 1.60 higher CPO prices and production recovery. However, FMCO could be 1.50 a slight drag. Management has slightly lowered FY21 FFB growth 1.40

guidance to 2-4%, in line with our 3%. Maintain MP with TP of 1.30

RM1.30 @ FY21E PER of 16x. Upstream peers (<16x PER) are more 1.20

attractive. 1.10

1.00 Within expectations. 1QFY21 registered core net loss (CNL) of RM25.7m, but is deemed as within both our/consensus’ expectations in anticipation of 0.90 improvement in subsequent quarters on higher CPO prices and production

recovery.1QFY21 FFB output of 742kMT (+4% YoY; 17% of full-year estimate) KLCI 1,594.44 and absence of DPS are also within expectations. YTD KLCI chg -2.0% YTD stock price chg 4.7% Results’ highlight. YoY, 1QFY21 CNL narrowed (-84%) mainly due to higher

average CPO price (+19%), improvement in FFB output (-4%) and better sugar Stock Information PBT of RM50.7m (vs. LBT of RM27.9m in 1QFY20). QoQ, 1QFY21 plunged into Shariah Compliant Yes CNL of RM25.7m (vs. CNP of RM114.4m in 4QFY20) as lower FFB output (- Bloomberg Ticker FGV MK Equity 29%) overwhelmed the impact of higher average CPO price (+4%). Market Cap (RM m) 4,888.5 Shares Outstanding 3,648.2 Improvements ahead. Premised on higher CPO prices (MPOB QTD-2QFY21: 52-week range (H) 1.67 +12% QoQ) alongside production recovery, 2QFY21 earnings are likely to 52-week range (L) 0.98 improve sequentially. However, ’s FMCO could be a slight drag. 3-mth avg daily vol: 4,290,243 Meanwhile, management has slightly lowered FY21E FFB growth (from 3-5%) Free Float N.A. to 2-4%, which is still in line with our 3%. Beta 1.2

No changes to earnings estimate. Major Shareholders Maintain MARKET PERFORM with a Target Price of RM1.30 based on FY21E Lembaga Kemajuan Tanah Persekutuan 78.1% PER of 16x. Traded at FY21E PER of 16.7x, we believe upside is limited. Minister of Finance 11.0% Upstream peers trading at PER of <16x are more attractive, at this juncture. Kerajaan Negeri Pahang 5.0% Meanwhile, FY21E PBV at 1.11x implies +0.5SD from mean. ESG score is 74%. Summary Earnings Table Key risks include: (i) Felda raising offer price, (ii) sharp rise/fall in CPO prices, (iii) estates and/or operations shutdown due to COVID-19. FYE Dec (RM m) 2020A 2021E 2022E Turnover 14075.7 14845.6 15101.6 EBIT 1118.0 1280.9 1440.9 PBT 353.5 330.6 459.1 Net Profit (NP) 150.0 292.2 327.9 Core NP 247.0 292.2 327.9 Consensus (CNP) N.A. 299.2 281.2 Earnings Revision N.A. 0% 0% Core EPS (sen) 6.77 8.01 8.99 Core EPS growth (%) 379.3 18.3 12.2 NDPS (sen) 3.0 4.0 4.5 BV/Share (RM) 1.17 1.21 1.25 Core PER (x) 19.8 16.7 14.9 Price/BV (x) 1.1 1.11 1.07 Net Gearing (x) 0.56 0.48 0.41 Net Dvd Yield (%) 2.2 3.0 3.4

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FGV Holdings Berhad Results Note

31 May 2021

Results Highlights FY Dec (RM m) 1Q21 4Q20 QoQ % 1Q20 YoY% 3M21 3M20 YoY% Revenue 3,393.5 4,008.8 -15% 2,783.1 22% 3,393.5 2,783.1 22% EBIT 42.0 324.2 -87% -113.6 nm 42.0 -113.6 nm Pretax Profit 15.0 326.1 -95% -163.1 nm 15.0 -163.1 nm Taxation -28.8 -138.0 -79% -10.8 166% -28.8 -10.8 166% MI -21.6 -53.1 -59% 31.5 nm -21.6 31.5 nm Net Profit -35.4 134.9 nm -142.3 -75% -35.4 -142.3 -75% Core Net Profit/ (Loss) -25.7 114.4 nm -156.7 -84% -25.7 -156.7 -84% EPS (sen) -0.97 3.70 nm -3.90 -75% -1.0 -3.9 -75% Core EPS (sen) -0.70 3.14 nm -4.30 -84% -0.7 -4.3 -84% Net DPS (sen) 0.0 3.0 -100% 0.0 nm 0.0 0.0 nm

EBIT margin 1.2% 8.1% -4.1% 1.2% -4.1% PBT margin 0.4% 8.1% -5.9% 0.4% -5.9% Tax rate -191.9% 42.3% 6.6% -191.9% 6.6%

CPO (RM / mt) 3,172 3,059 4% 2,669 19% 3,172 2,669 19% FFB ('000 MT) 742 1,042 -29% 712 4% 742 712 4% Source: Company, Kenanga Research

Segmental Breakdown FY Dec (RM m) 1Q21 4Q20 QoQ % 1Q20 YoY% 3M21 3M20 YoY% Segmental Revenue - Plantation 2,795.6 3,301.6 -15% 2,187.4 28% 2,795.6 2,187.4 28% - Sugar 514.9 630.3 -18% 513.0 0% 514.9 513.0 0% - Logistics and Others 83.0 76.9 8% 82.7 0% 83.0 82.7 0% Group Revenue 3,393.5 4,008.8 -15% 2,783.1 22% 3,393.5 2,783.1 22%

Segment PBT - Plantation -50.8 274.8 nm -152.1 -67% -50.8 -152.1 -67% - Sugar 50.7 77.4 -35% -27.9 nm 50.7 -27.9 nm - Logistics and Others 11.7 13.1 -10% 9.7 21% 11.7 9.7 21% - Reconciliation 3.4 -39.3 nm 7.2 -53% 3.4 7.2 -53% Group PBT 15.0 326.1 -95% -163.1 -109% 15.0 -163.1 -109% Source: Company, Kenanga Research

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FGV Holdings Berhad Results Note

31 May 2021

Peer Comparison Name Last Market Shariah Current Revenue Growth Core Earnings Growth PER (x) - Core Earnings PBV (x) ROE Net Div. Target Price Rating Price Cap Compliant FYE (%) Yld. (%) (RM) 1-Yr. 2-Yr. 1-Yr. 2-Yr. 1-Yr. 2-Yr. 1-Yr. 1-Yr. 1-Yr. Hist. Hist. (RM) (RM'm) Fwd. Fwd. Fwd. Fwd. Fwd. Fwd. Fwd. Fwd. Fwd. STOCKS UNDER COVERAGE FGV HOLDINGS BHD 1.34 4,888.5 Y 12/2021 5.5% 1.7% 18.3% 12.2% 94.9 24.2 19.1 1.2 1.1 6.7% 1.5% 1.30 MP GENTING PLANTATIONS BHD 8.07 7,240.4 Y 12/2021 -1.7% 5.5% 31.2% 9.1% 30.4 23.1 21.2 1.5 1.4 6.3% 2.4% 8.65 MP HAP SENG PLANTATIONS HLDGS 1.96 1,567.4 Y 12/2021 8.4% 4.2% 39.2% 6.5% 22.6 16.3 15.3 0.9 0.9 5.6% 3.6% 2.15 OP IJM PLANTATIONS BHD 1.97 1,734.7 N 03/2022 3.6% 3.7% -2.8% 9.1% 14.1 14.5 13.3 1.2 1.2 8.1% 3.0% 2.30 OP IOI CORPORATION BHD 4.11 25,719.7 Y 06/2021 24.2% 6.2% 23.8% 5.6% 34.0 30.6 23.4 2.7 2.6 10.8% 2.1% 4.20 MP KEPONG BHD 22.26 24,008.6 Y 09/2021 14.1% 2.5% 53.7% 3.5% 31.6 20.6 19.9 2.2 2.1 10.4% 2.5% 25.10 OP PPB GROUP BERHAD 18.62 26,488.8 Y 12/2021 18.4% 11.1% 3.3% 7.9% 20.2 19.6 18.2 1.2 1.1 6.0% 2.1% 19.80 MP PLANTATION BHD 4.54 31,256.0 Y 12/2021 17.2% 5.0% 102.3% 4.7% 37.3 18.4 17.6 2.3 2.2 12.2% 3.5% 5.65 OP TA ANN HOLDINGS BERHAD 2.90 1,277.3 Y 12/2021 6.2% 3.2% 60.7% 6.9% 20.1 12.5 11.7 0.9 0.8 6.9% 3.4% 3.05 MP TSH RESOURCES BHD 1.07 1,476.8 Y 12/2021 19.8% 1.4% 7.5% 11.3% 20.5 19.1 17.1 1.0 0.9 7.8% 2.3% 0.970 UP UNITED MALACCA BHD 5.18 1,086.6 Y 04/2021 38.8% 9.1% 72.9% 60.6% N.A. 32.0 19.9 0.8 0.8 2.6% 1.7% 5.30 MP Simple Average 14.0% 4.9% 37.3% 12.5% 32.6 21.0 17.9 1.4 1.4 7.6% 2.6%

Source: Bloomberg, Kenanga Research

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FGV Holdings Berhad Results Note

31 May 2021

Stock Ratings are defined as follows:

Stock Recommendations

OUTPERFORM : A particular stock’s Expected Total Return is MORE than 10% MARKET PERFORM : A particular stock’s Expected Total Return is WITHIN the range of -5% to 10% UNDERPERFORM : A particular stock’s Expected Total Return is LESS than -5%

Sector Recommendations***

OVERWEIGHT : A particular sector’s Expected Total Return is MORE than 10% NEUTRAL : A particular sector’s Expected Total Return is WITHIN the range of -5% to 10% UNDERWEIGHT : A particular sector’s Expected Total Return is LESS than -5%

***Sector recommendations are defined based on market capitalisation weighted average expected total return for stocks under our coverage.

This document has been prepared for general circulation based on information obtained from sources believed to be reliable but we do not make any representations as to its accuracy or completeness. Any recommendation contained in this document does not have regard to the specific investment objectives, financial situation and the particular needs of any specific person who may read this document. This document is for the information of addressees only and is not to be taken in substitution for the exercise of judgement by addressees. Kenanga Investment Bank Berhad accepts no liability whatsoever for any direct or consequential loss arising from any use of this document or any solicitations of an offer to buy or sell any securities.Kenanga Investment Bank Berhad and its associates, their directors, and/or employees may have positions in, and may effect transactions in securities mentioned herein from time to time in the open market or otherwise, and may receive brokerage fees or act as principal or agent in dealings with respect to these companies.

Published and printed by:

KENANGA INVESTMENT BANK BERHAD (15678-H) Level 17, Kenanga Tower, 237, Jalan Tun Razak, 50400 Kuala Lumpur, Malaysia Telephone: (603) 2172 0880 Website: www.kenanga.com.my E-mail: [email protected]

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