RHB Research: Disposal of Tradewinds stake to affect FGV’s earnings

KUALA LUMPUR, Jan 30 - Felda Global Ventures Holdings Bhd (FGV)’s disposal of its 20 per cent stake in Tradewinds (M) Bhd (TWS) would hurt its earnings slightly, RHB Research Institute said today.

The research house made the projection following FGV’s acceptance of a RM551 million takeover offer by Tradewinds for its 59.294 million shares at RM9.30 per share.

It said this would result in the plantations giant gaining RM57.51 million on sale alone as the offer price is 2.4 per cent higher than Tradewinds’ last trading price of RM9.08.

But RHB Research said that FGV’s acceptance of the offer would result in a slightly negative net impact to its earnings.

“The interest income generated from the cash proceeds of RM551 million of approximately RM10-15m p.a. will not be able to offset the associate profit contribution from TWS of an estimated Rm45-50m in FY12.

“We estimate that the earnings impact from this disposal would therefore be a negative 3-5 per cent on FGV’s FY12 earnings” excluding the gain of RM57.51 million, RHB Research wrote today.

RHB further said that FGV was “in dire need” to put cash pile to good use, noting that FGV had said it would use the cash raised from the disposal of Tradewinds’ shares for future business expansion and working capital within the next three years.

“We believe FGV needs to look aggressively for new acquisitions to expand its earnings stream, otherwise its large cash hoard may start to drag down its ROE (return on equity),” it said.

RHB said that FGV’s existing net cash pile at the end of last year’s third quarter stood at RM5.25 billion.

RHB maintained its neutral rating for the FGV counter.

Business daily The Edge today reported that FGV had agreed to sell off its stake in tycoon Tan Sri Syed Mokhtar Al-Bukhary’s company at a price lower than the valuation of independent advisors.

The paper reported that independent advisor’s circular to FGV shareholders said that the privatisation offer may not be fair in comparison with past transactions, but was reasonable.


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