FGV: Two deals in one week!

Recent Corporate Development

It is reported in Malaysian Insider (here) that FGV has been in talks with PT Eagle High's controlling shareholder Tan Sri Peter Sondakh to acquire a 30%-stake in PT Eagle High for RM1 billion. PT Eagle High is reported to own a total Indonesian land bank of 419,006ha, of which 147,000ha are planted.

This is a surprise after it announced on Monday, June 8 that it would be acquiring 4 companies and an oil palm estate from Golden Land Bhd at RM655 million. This acquisition effectively represents the purchase of oil palm estates of 24218 acres plus an palm oil mill. For more, go here.

The Sabah acquisition & the proposed Indonesian acquisition represent FGV's concerted effort to expand its oil palm land as well as to lower the average age of its tree profile. At the same time, the group is reported to be seeking buyer(s) for its crushing and refining businesses in the US and Canada, the people said. The asking price is reported to about US$150 million (RM559.74 million).

Recent Financial Results

FGV, which has suffered from 3 quarters of mediocre financial performance, will see its shares removed as a component stock of FBMKLCI soon. At its last traded price fo RM1.86, FGV has a PER of 40.8 times (based on last 4 quarters' EPS of 4.56 sen) or a PBR of 1.07 times (based on NTA of RM1.75 as at 31/3/2015). It paid out dividend totaling 10 sen or commanding a DY of 5.4%.


Table: FGV's last 10 quarters' financial performance (Source: ShareInvestor)


Diagram: FGV's last 10 quarters' financial performance (Source: ShareInvestor)

Technical Outlook

The multitude of negative factors has caused the stock to drop steadily in the past 1 year from RM4.60 to below RM2.00 today. It is in a clear downtrend line, with resistance at RM2.30. Until that downtrend line is taken out, the stock's outlook remains negative.


Chart: FGV's weekly chart as at Jun 11, 2015 (Source: ShareInvestor.com)
 
Conclusion

Based on poor financial performance, unattractive valuation & bearish technical outlook, FGV is a stock to be avoided. Nevertheless, the share price has taken such a heavy beating that those who have the stock, might as well hold onto it.

Note:
In addition to the disclaimer in the preamble to my blog, I hereby confirm that I do not have any relevant interest in, or any interest in the acquisition or disposal of, FGV.