• FGV Holdings has proposed to dispose of its 100% stake in FGV China Oils for RMB165mil or RM100mil to Grand Industrial Holding Co Ltd.

• Grand Industrial, which is incorporated in China, is involved in the import and export of different kinds of commodities in the country.

• FGV China Oils is based in Dongguan City, Guangdong province. The company is involved in the production and sales of palm products.

• The proposed disposal is expected to be completed between the end of FY19E and 1QFY20.

• We view the proposed disposal positively as FGV China Oils is a loss-making entity.

• FGV China Oils recorded a net loss of RMB25.4mil or RM15.2mil in FY18. The proposed disposal is part of FGV’s move to dispose of assets that are non-strategic.

• We think that the one-off loss on disposal is small as FGV may have recorded impairments for its investment in FGV China Oils. The original cost of investment was RMB320mil.

• FGV said that it would be reinvesting the disposal proceeds into its business activities.

• Maintain SELL on FGV with a fair value of RM1.08/share.

Source: AmInvest Research - 12 Jul 2019