Why no Professional Analyst recommends a BUY on Felda Global Ventures? - KYY

28^th Feb 2014

I have not seen any professional analyst recommending a buy on Felda Global Ventures. WHY?

Surely the professionals must know that the CPO price increase as I mentioned in my previous article, will benefit FGV the most, being the world largest CPO producer.

Soon after its initial public offer (IPO) its price went up to above Rm 5.50 about 18 months ago. It is trading currently around Rm 4.50. Since the average CPO price for last year was about Rm 2,250 and for this year will be about Rm 2,750, the additional profit of Rm 500 per ton is for no additional effort. I believe FGV will benefit the most because it produces the largest amount of palm oil in the world.

As required by the Securities Commission, all plantation companies have to report their monthly production of CPO. FGV reported their CPO production for the last 6 months from August 2013 to January 2014 the following amount: 251,000, 292,000, 293,000, 271,000, 253,000, 233,000 Tons respectively, totaling 1,593,000 tons. Assuming FGV produces the same amount for the next amount, the total production for one year will be 3,186,000 tons.

Basing on the additional profit of Rm 500 per ton, FGV’s additional profit for doing nothing will be Rm1,593,000,000. Even if FGV’s management team is inefficient, FGV will still receive this fantastic amount of 1.59 billion ringgit. When this additional profit is shown in its quarterly result, I believe its share price will be reflected.  

Now let us look at the FGV price chart since its IPO and the CPO price Chart. It is most illogical for the price of FGV or Kulim or any oil palm plantation company, to go down when CPO price is going up. Common sense will tell you that this is a good buying opportunity to buy FGV or other oil palm plantation shares.

I am wondering why no analyst recommends a BUY on FGV. Perhaps they are also accumulating it, like I am doing.   

I am obliged to warn you that if you decide to buy FGV or any other plantation share, you are doing it at your own risk. Moreover, I do not need you to buy to push up the price to help me to get richer. Remember, my intention is honorable. I just want to teach you how to fish.