Kenanga Investment Bank Research said despite the mind-boggling gap between the offer price and FGV’s IPO listing price of RM4.55 -- price-to-earnings ratio (PER) of 17.6 times; price-to-book value (PBV) of three times -- it thinks the offer is fair. KUALA LUMPUR: Shares of FGV Holdings Bhd fell to a low of RM1.23 on Wednesday as investors were disappointed with Felda’s takeover offer price of RM1.30 a share, though analysts described it as fair. At 11.12am, it was down two sen to RM1.25. There were 11.19 million shares done at prices ranging from RM1.23 to RM1.28. The FBM KLCI rose 17.75 points or 1.09% to 1,649.45. Turnover was 5.32 billion shares valued at RM2.61bil. There were 485 gainers, 581 losers and 437 counters unchanged. Kenanga Investment Bank Research said despite the mind-boggling gap between the offer price and FGV’s IPO listing price of RM4.55 -- price-to-earnings ratio (PER) of 17.6 times; price-to-book value (PBV) of three times -- it thinks the offer is fair. The offer price implies FY21E PBV of 1.1 times (64% discount to IPO valuation), which better reflects FGV’s current prospect, given that FGV is a pale shadow of its former self, it said in a research note. “FGV’s return on equity (ROE) and return on asset (ROA) have deteriorated to c.5% and c.1% for FY20E (from average 15% and 6% in FY11-12), respectively, and it was even loss-making for the past two years, ” it said. As the company has been less efficient in using its assets, it is only right that investors would ascribe a lower value to FGV’s assets, Kenanga Research said. “FGV’s financial position was also stronger back then, with a net cash/share position (excluding land lease agreement) of 89 sen (vs. net gearing of c.0.8 times currently), ” it said. Kenanga Research said from a PER perspective, the offer price implies FY21E PER of 18.5 times (5% premium to IPO PER), potentially due to current high CPO price environment. “We deem the offer price of RM1.30 a share to be fair. FY21E PBV of 1.1 times reflects its three-year mean valuation, which is also in line with its peers’ average. “This is also in view of downside bias to CPO prices. The steep decline in CPO futures curve implies more than RM800 a tonne downside by the end of 2021, justifying mean valuations. Our previous TP is RM1.25 based on FY21E PBV of one time, with market perform rating, ” it said. On Tuesday, Felda had signed conditional share purchase agreements (CSPAs) with KWAP and Urusharta Jamaah to acquire 13.88% of FGV shares at RM1.30 each. It then proposed a mandatory takeover offer (MO) for all remaining FGV shares also at RM1.30. After the completion of the CSPAs, Felda will in aggregate control 52.29% of FGV, triggering the MO. The completion of the CSPAs is conditional on: (i) Felda receiving and accepting a letter of offer/commitment to finance the proposed acquisition and the proposed mandatory takeover offer, and (ii) confirmation from Felda’s financier/arranger that such financing is available for utilisation/drawdown. Upon the CSPAs becoming unconditional, Felda will serve the notice of MO to FGV’s board of directors.
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