Purchase of EHP stake will benefit Felda, says securities firms

According to the portal, Malaysia MyNation News, citing a joint report from Daiwa Analysis Securities Group Inc and PT Bahana Securities, EHP was expected to record a profit of 504 billion rupiah (100 rupiah = RM0.03342) in the fourth quarter of 2016, or 291 per cent increase over the previous quarter.

"(This is) because of the strengthening of the crude palm oil (CPO) price and the increase in production (44 per cent in the fourth quarter) following the recovery from the effects of El Nino and the maturity of the crop," it said.

Daiwa Securities is the largest brokerage and financial services group in Japan with assets of nearly US$200 billion (US$1 = RM4.46) in 2015, while Bahana Securities is an investment bank in Indonesia.

According to the report, EHP's oil palm plantation has entered its prime production phase of between eight to 18 years.

The report said EHP's yield was expected to rise by 17 per cent year-on-year (yoy) to 13.2 tonnes of fresh fruit bunches per hectare (ha) his year, compared to 11.3 tonnes per ha in 2016.

"EHP is also projected to produce 421,000 tonnes of CPO, up 44 per cent yoy compared to 292,000 tonnes produced in 2016.

"This should translate into solid 2017 forecast net earnings of 420 billion rupiah, compared to a net loss of 48 biliion rupiah booked in the previous year," it said.

The companies said EHP's share price was expected to increase to 630 rupiah each within 12 months to come, which is higher than what Felda paid for 580 rupiah.

FELDA, through its investment arm, FIC Properties Sdn Bhd, invested US$505.4 million to buy a 37 per cent stake in the EHP from Rajawali Group.