Sawit: FGV Holdings' net earnings exceeded expectations, says HLIB Research
FGV is hopeful that the US CBP will uplift its Withhold Release Order (WRO) by year-end.
KUALA LUMPUR: FGV Holdings Bhd's first quarter (Q1) 2022 net profit of RM427.6 million beat expectations, accounting for 51.4-52.5 per cent of Hong Leong Investment Bank Bhd's (HLIB Research) and consensus estimates.
This was mainly due to the higher-than-expected palm product prices and lower-than-expected land lease agreement (LLA) charges.
The bank-backed research firm said all these were partly moderated by seasonally weaker fresh fruit bunch (FFB) output, losses at 51 per cent-owned sugar segment by MSM Malaysia Holdings Bhd, and lower contribution from the logistics sector.
HLIB Research said FGV registered FFB output growth of 5.0 per cent during the first four months of 2022, as persistent labour shortages were mitigated by more favourable weather conditions, particularly in its Sabah operations and more efficient allocation of labour to focus on harvesting and collection activities.
For the financial year ending December 31, 2022 (FY22), HLIB Research noted that FGV is keeping to its FFB output growth guidance of five to eight per cent.
Besides that, FGV expects FY22 crude palm oil production to increase to RM2,100 to RM2,200 per tonne in FY22 from RM1,756 per tonne registered in FY21, mainly on the back of sharply higher fertiliser costs and a minimum wage hike.
HLIB Research also said the minimum wage hike would result in a RM60 per tonne increase in CPO production cost.
Meanwhile, FGV expects to receive 7,900 new foreign workers by the third quarter (Q3) of 2022, which should help alleviate its labour shortage issue.
FGV has recently adopted its revised recruitment and procedure guidelines and engaged with US Customs and Border Protection (CBP) to share updates on its labour programmes and progress related to the Elevate assessment.
FGV is hopeful that the US CBP will uplift its Withhold Release Order (WRO) by year-end, HLIB Research noted.
HLIB Research has raised FGV's FY22, FY23, and FY24 net profit by 55.7 per cent, 3.9 per cent and 4.6 per cent, mainly to account for higher CPO price assumptions, higher production costs, and lower costs earnings assumptions at MSM.
The research firm has maintained its 'Buy' call on FGV with a higher target price of RM2.53 from RM2.43 previously.
Sumber: New Straits Times
