• Sime Darby Plantation (SDPL) announced that it has been informed by its subsidiaries in Indonesia that PT Asa Karya Multi Pratama has filed a civil claim against the group. However to date, SDPL has not been legally and properly served with any court summons in respect to the civil claim.

• Amongst others, PT Asa Karya is alleging that SDPL’s subsidiaries in Indonesia had already established to sell shares in PT Ladangrumpun Suburabadi and PT Sajang Heulang to it for IDR1.65trillion (RM483mil). The down payment had already been made by PT Asa Karaya. However soon after, the down payment was returned to PT Asa Karya. PT Asa Karya alleged that SDPL interfered with the sale and purchase agreement by instructing the subsidiaries not to proceed with the transaction.

• Amongst others, PT Asa Karya is seeking for the sale and purchase agreement to be valid and a material compensation of IDR882.5bil (RM258mil). PT Asa Karya is also seeking an immaterial compensation of IDR5trillion (RM1.46bil) for the loss of reputation and efforts that have been spent for the process of the transactions.

• SDPL has been advised by its solicitors in Indonesia that the group has sufficient legal basis and merits to defend its position in this claim.

• The total claim of RM1.7bil by PT Asa Karya is about 77.1% of SDPL’s FY22F net profit of RM2.2bil. However, we do not think that SDPL would be recording any contingent liability or provision in respect of the claim.

• We think that the court case may take years to resolve unless the two parties come to a resolution.

• We maintain SELL on SDPL with a fair value of RM4.40/share.

Source: AmInvest Research - 24 Mar 2022