INVESTMENT HIGHLIGHTS

• Appeal in dispute over unit's land rights in Indonesia partly allowed by court

• Potential writeback in the future

• Earnings estimates maintained

• Maintain BUY with TP of RM2.60 due to attractive valuation

Appeal in dispute over unit's land rights in Indonesia partly allowed by court. Fima Corporation Berhad (FIMACOR) has announced that the Pengadilan Tinggi Tata Usaha Negara Jakarta has: i) partly allowed PT Nunukan Jaya Lestari’s (PTNJL) appeal against the State Administrative Court’s decision, with costs, ii) declared that the Ministerial Order revoking PTNJL’s Hak Guna Usaha (HGU) to be void save for the areas overlapping with forestry areas/third party interests measuring 5,138 hectares, and iii) ordered the Defendant to revoke the Ministerial Order save for the areas overlapping with forestry areas/third party interests measuring 5,138 hectares.

Potential writeback in the future. We gather that the assets affected by the Ministerial Order had been impaired resulting in gross impairment loss of RM44.7m in FY17. Hence, there could be potential writeback in the future depending on the full and final determination of the matter by the Indonesian courts.

Earnings estimates maintained. Pending the final decision from Indonesian courts on the matter, we maintain our FY18 CNI of RM56.9m. Moreover, FY19 CNI is also maintained at RM63.5m.

Maintain BUY with TP of RM2.60. Our TP is based on Sum-OfParts valuation (Refer Page 3). Although we expect FY18 CNI to decline on-year, the stock is supported by attractive valuation of 8.7x Forward PE and good dividend yield of 6.1%. Furthermore, its balance sheet is strong with a net cash position.

Source: MIDF Research - 5 Jan 2018