KUCHING: Felda Global Ventures Holdings Bhd (Felda Global) has terminated its joint venture (JV) with Bunge Ventures Canada LP (Bunge), with the intention of dissolving the entity by November 30, 2013.
According to the research arm of Kenanga Investment Bank Bhd (Kenanga Research), the JV was originally set up for the soybean and canola business in Canada, with Felda Global collecting tolling fees from Bunge based on the latter’s usage of Felda Global’s downstream facilities.
At this point, Felda Global does not expect any material impacts on its financial 2013 (FY13) earnings resulting from the JV termination, although a further accounting assessment will be made on the final effective dissolution date.
“Hence, we maintained our FY13E and FY14E core earnings of RM723 million and RM895 million, respectively,” the Kenanga Research said in its research note
Following the termination, the company will now be involved in the commercial operation of the business (including the crushing and processing of soybean and canola into refined products).
“Accordingly, Felda Global will now assume the market risk of the soybean and canola purchasing and hedging, which means it will start to recognise its revenue and cost of sales from the soybean and canola downstream business,” the research division highlighted.
As such, Kenanga Research maintained its ‘market perform’ rating and target price of RM4.60, based on an unchanged 18.7-fold forward price-earnings ratio (PER) on earnings per share of 24.5 sen for the forecast calendar year 2014.