Felda Global Ventures Holdings Bhd (FGVH), which is in net cash position, plans to undertake aggressive expansion, especially to acquire plantation land bank, a research house said.
HwangDBS Vickers Research said FGV's improving operational efficiency should also help to propel growth, given its large fresh fruit bunch base.
"FGV intends to raise its sugar output and storage capacity, as well as to expand downstream via strategic overseas partnerships," it said in a research note said.
The research house has maintained a "hold" call on FGV's shares of RM4.85.
As at 11.55am, the stock slipped 1.24 per cent to RM4.79.
"At the current price FGV offers limited upside to our discounted cash flow-based target price of RM5.05, which implies 18 times financial year 2013 price earnings ratio.
"However, we like the counter for its steady cash flow and 50 per cent dividend payout policy, which implies a decent 3.9 per cent yield," HwangDBS said.
Meanwhile, FGV's 99-year land lease agreement for 355,864 hectares of plantation land from Felda positions the group as the world's third largest oil palm planter, the research house said.
It said 83 per cent of FGV's land area is mature with the remainder expected to progressively come to maturity over the next few years.
"FGV is also replanting about 15,000 hectares per annum to maintain and improve its age profile," the research house said.
FGV's 49 per cent-associate Felda Holdings Bhd (FHB) complements the group's upstream operations with milling and downstream businesses, HwangDBS said.
FGV has access to FHB's 3.3 million metric tonnes of crude palm oil, or seven per cent of global supply.
"We believe this provides FGV large economies of scale cost-wise," it said. -- Bernama
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