• Felda Global Ventures’ subsidiaries have been served with a writ of summons and a statement of claim by Fulle Technik Sdn Bhd.

• Fulle Technik is claiming a total amount of RM23.39mil, special damages, a 5% interest on general damages, an interest of 2.5% on special damages, exemplary damages, 5% interest on the judgment debt and costs incurred in respect of the legal suit.

• FGV’s subsidiaries appointed Fulle Technik in September 2014 to develop a prototype machine called subsoil fertilizer machine.

• Fulle Technik said that FGV breached its contractual obligations by appointing a third party via an open tender to build and supply the machines.

• This development is negative for FGV as there is a possibility that the group may have to record a provision for the claim of RM23.39mil.

• The provision for litigation would reduce FGV’s FY18F net profit by 27%.

• FGV appears to be involved in a number of legal suits. In early April, the group commenced legal proceedings in Dubai to review the claim against its former customer, Safitex General Trading.

• FGV is seeking a payment of US$11.7mil together with interest from Safitex. FGV said that a successful claim would reverse the impairment of RM29.6mil while an unfavourable outcome may result in more losses for the group.

• In early April also, it was reported that FGV may be back in the M&A mode to correct its ageing oil palm profile and raise the FFB yield per hectare. FGV may be looking to do some refinancing and issue a sukuk bond.

• Maintain HOLD on FGV with a fair value of RM2.00/share.

Source: AmInvest Research - 10 Apr 2018