AllianceDBS upgrades earnings forecast on FGV on rising CPO prices

KUALA LUMPUR: Rising crude palm oil prices are expected to translate into higher profits for FGV Holdings Bhd due to its high operating leverage, says AllianceDBS research.

Maintaining its buy call on the stock, the research house lifted its FY20/21F earnings forecast on FGV by 31/21% and increased its target price from RM1.60 to RM1.80 on expectations of higher CPO prices.

“We believe that the recent trend in CPO prices should continue into FY20 due to the plateauing of palm oil supply due to dissipation in production yields, supply disruption from El-Nino and stronger soybean prices.

“We upgrade our CPO price assumptions for FY20-21F from RM2,230/2,410 to RM2,450/2,540,” it said.

AllianceDBS remains positive on FGV’s transformation plan, given that it has achieved most of its targets set out so far.

Its target of lowering its ex-mill CPO production cost is the biggest attribute to its buy call, it added.

Source: TheStar