• Leong Hup International (LHI) received a notice of proposed decision issued by the Malaysian Competition Commission (MyCC), which was premised primarily on the allegation that its wholly-owned Leong Hup Feedmill Malaysia had engaged in agreements and/or concerted practices of poultry feed price-fixing.

• In a Bursa Malaysia announcement, the company clarified that the notice of proposed decision, including potential financial penalty, is not final. Note that the finding of infringement will allow MyCC to impose a one-off financial penalty of up to 10% of the company’s 10% turnover during the period of infringement.

• LHI denied the allegation and will be consulting external legal counsel to review the matter. Its next course of action is to submit written representations and make an oral representation before MyCC within a 30-day period.

• MyCC provisionally found 5 companies to have infringed Section 4 of the Competition Acts 2010 by entering anti-competitive agreements/and or concerted practices in increasing the price of poultry feed between early 2020 and mid-2022.

• The potential financial penalty may negatively affect the group’s profitability but the impact will likely be a one-off. We maintain our HOLD recommendation on Leong Hup with a fair value of RM0.50 based on FY22F PE of 17x, at -1.5 SD of its 3-year historical average, and a neutral ESG scoring of 3 stars.

Source: AmInvest Research - 8 Aug 2022