This is written by my colleague Zaidi Ismail.
KUALA LUMPUR: FELDA Global Ventures Holdings Bhd's (FGV) positive share performance yesterday reflects investor confidence in the stock as well as on Malaysia's business entities, Affin Investment Bank head of retail research Dr Nazri Khan said.
"Based on the premium, this is a good sign indeed as it shows investors have a lot of confidence in FGV, with a lot of potential buyers out there and also an active domestic fund buying activities," said Nazri.
He said for the medium term, the price of FGV shares hinges on the overall stock market performance of Bursa Malaysia, but Affin Investment targets the stock to hit RM5.52 and possibly RM6.00 by year-end.
FGV shares made its debut on Bursa Malaysia yesterday, closing 75 sen higher at RM5.30 compared with its retail offer price of RM4.55.
He said despite Malaysia's defensive share market, which is going through a tough time, the stock held on well.
"Now we just have to see its business model and what it plans to do with the money. I hope they (the company) will buy the plantation land quickly," said Nazri.
InterPacific Research head of research Pong Teng Siew also shared the same sentiment and said he was confident FGV shares could gain above RM5.80 within the next one month.
"The price earnings is based on its future geographical expansion and cost reduction when it can gain economies of scale via its international business. Collaboration with foreign investors also plays an important role as it offer economies of scale in terms of operations, boost competitiveness as well as open new opportunities for business expansion, he said.
An analyst at Public Investment said the strong performance was in line with its expectations, with a general target of between RM5.20 and RM5.50.
An analyst at a foreign research house said the stock performed faired quite well and FGV's earnings should rise by 10 to 15 per cent over the next two financial years as it expands its downstream operations which can be more profitable as value- added products fetch better price than selling harvested oil palm fruits.
He added that 37 per cent of FGV estates were maturing and that with current crude palm oil prices at over RM3,000 a tonne, the company was set to benefit.