Friday 29 Mar 2024
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KUALA LUMPUR (April 11): FGV Holdings Bhd shares fell 4.6% this morning as AllianceDBS Research said shareholders of FGV may not be too keen on the land lease agreement (LLA) revision proposed by parent Federal Land Development Authority (Felda).

As at 11.50am, FGV was trading six sen lower at RM1.24.

In a note today, AllianceDBS Research said Felda's plan to review the LLA it has with FGV may not get approval from the latter's shareholders if an increase in payment is expected.

"While the potential review of the LLA between FGV and Felda is still preliminary, we do not think that it will be revised at the expense of FGV.

"Any deal that will result in higher payments from FGV will unlikely be agreed upon by shareholders of FGV," said AllianceDBS Research.

The research firm said Felda would have to pay FGV compensation in accordance with the LLA's terms and conditions if it intends to amend or terminate the LLA.

"We maintain our Buy call on FGV with a target price of RM1.75," it said.

The LLA is a 99-year agreement between Felda and FGV. Under the LLA, FGV pays Felda RM248 million per year and 15% of plantation profits per year for lease of plantation land.

Yesterday, Minister of Economic Affairs Datuk Seri Mohamed Azmin Ali in his speech in Parliament said the government would like to revisit the terms of the LLA between FGV and Felda.

This is among various initiatives and solutions proposed in the Felda white paper presented at Parliament yesterday. The white paper is intended to propose solutions to improve the financial standing of Felda.

"It is in the government's best interest for FGV to do well since Felda owns a 33.6% stake in FGV. The government intends to enhance corporate governance at Felda and FGV. This bodes well for FGV," said AllianceDBS Research.

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