FGV TRANSFORMATION ERA 

Malaysia being the second largest palm oil exporter in the world. This clearly tell how important palm oil industry toward Malaysia economy.

Let see what happen lately.

Date : 25 April 2019

FGV Holdings Bhd is expected to reduce its management workforce by 30% over the span of three years as the plantation giant seeks to trim its costs, while optimising its assets as part of its extensive turnaround plan.

The world’s largest crude palm oil (CPO) producer is seeking to cut as many as 6,000 staff as part of its recovery plan after it recorded a massive RM1.07 billion loss for its financial year ended Dec 31, 2018 (FY18) — its worst since going public in 2012 — as a result of huge impairments and low CPO prices.

Sources told The Malaysian Reserve that the lay off will involve some 20,000 workers at its headquarters in Jalan Raja Laut, Kuala Lumpur (KL), and regional offices.

Source obtain from https://themalaysianreserve.com/2019/04/25/fgv-set-to-lay-off-6000-staff-in-3-years/

Let take average salary of 3.5k per person. If FGV going to lay off 6,000 staff over the period of 3 years. Technically speaking could save up RM21,000,000 per months or equal to 252 million saving per annum. That could ease the tide cash flow of FGV.

Date : 24 April 2019

FGV Holdings Bhd, the world’s third largest oil palm estate operator, and pilgrims fund Lembaga Tabung Haji are considering selling their plantation assets in Indonesia, in a bid to improve their financial positions, according to Bloomberg.

Quoting people with knowledge of the matter, it  said the two government-linked companies are working with an adviser to gauge potential buyer interest in Trurich Resources Sdn Bhd, which controls 42,000ha of oil palm estates in Kalimantan.

They may seek to value Trurich, a joint-venture company between them, at as much as US$1 billion (RM4.13 billion) including debt, the news wire wrote.

Source obtain from https://www.theedgemarkets.com/article/fgv-tabung-haji-mull-us1b-indonesia-sale

Selling off non core asset and focus on local plantation management should be the main focus.  This JV is base on 50/50. Therefore, FGV should be getting approximately RM2 billion from the deal if able to sell off TRUIRCH Resources Sdn Bhd. But such a big amount deal, it may take time to find potential buyer and financing. I think to be finalise the deal, it will take 3-6 months to be materialise and announce. 

Date : 

Malaysia signed a memoradum of understanding to enhance palm oil trade with China this afternoon, prior to the start of the second Belt & Road Forum here. 

The signing ceremony was witnessed by Malaysian Prime Minister Tun Dr Mahathir Mohamad and China's Premier Li Keqiang. 

Under the signed MoU, the countries agree to an additional supply of a minimum of 1.9 million tonnes of palm oil to China over a five-year period, starting from 2019. The volume is valued at RM4.56 billion, based on an average price of US$600 per tonne.

This is in addition to the four purchase contracts signed in March for the export of 1.62 million tonnes of palm oil from Malaysia to China, worth an estimated US$891 million (RM3.64 billion) in total.

China was Malaysia’s second biggest importer of palm oil and palm-based products in 2018, during which Malaysia exported 3.07 million tonnes of palm oil and palm products valued at RM8.38 billion to China — up 7.3% from the 2.86 million tonnes (worth up to RM9.39 billion) recorded in 2017.

In the official meeting with Li at Diaoyutai State Guesthouse, Dr Mahathir told China's premier if each Chinese take a spoonful of palm oil a day, Malaysia will be very rich, given China's sizable 1.4 billion population.

Source obtain from https://www.theedgemarkets.com/article/malaysia-supply-least-19-mil-more-tonnes-palm-oil-china

We are seeing currently Malaysia- China tie is getting stronger with many CHINA related projects held at Malaysia going to resume and play a bigger role under the current administrative. Therefore, FELDA SETTLER interest will be well taking care and this will help the government to gain trust from the FELDA settlers to vote them for the next election if they wellfare is being take care. However, with this resume, not only FGV will benefit, other plantation company also will benefit from the rise of the palm oil price.

TECHNICAL POINT OF VIEW

SUPPORT : 1.12

RESISTANCE : 1.38 ; 1.56 ; 1.74

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Disclaimer: Above article is for educational sharing purpose. Kindly consult your dealer/remisier for any investment advise before you make any decision. Trade at your own risk.