INVESTMENT HIGHLIGHTS

• Wholesale and retail sugar price hike

• FGV earnings estimate increased slightly by 2%

• Neutral on the news

• Maintain NEUTRAL with TP of RM1.77

Wholesale and retail sugar price hike. The Ministry of Domestic Trade, Cooperatives and Consumerism (MDTCC) issued a federal gazette on the enforcement of the Price Control and Anti-Profiteering (Determination of Maximum Price) (No.2) Order 2017. The new regulation dictates that the ceiling price of refined sugar will increase as much as 11sen/kg effective from 1st March 2017. Currently, the wholesale and retail ceiling price of coarse grain white refined sugar for the states in Peninsular Malaysia for instance, is of RM2.87/kg (previously RM2.76/kg) and RM2.95/kg (previously RM2.84/kg) respectively. These represent approximately +4% increases in the price of refined sugar.

FGV earnings estimate increased slightly by 2%. We are increasing FGV FY17 and FY18 CNP by 2% each to RM113m and RM116m, respectively. This is in line with MSM net profit forecast which has been increased by 2%. Note that FGV owns 51% stake in MSM.

Neutral on the news. We are neutral on the news as the impact on earnings is limited at 2%.

Maintain NEUTRAL with TP of RM1.77 based on unchanged 1.0x Price to Book value. Despite the earnings estimate increase, our TP is unchanged as it is Book Value driven. Maintain NEUTRAL call on FGV due to minimal earnings impact expected from the news.

Source: MIDF Research - 3 Mar 2017