INVESTMENT HIGHLIGHTS

• Suspend its Group President/CEO

• Business as usual in the mean time

• We are neutral on the news

• Earnings estimates maintained

• Maintain NEUTRAL with TP of RM1.54

Suspend its Group President/CEO. FGV Holdings Berhad (FGV) announced that the Company has suspended its Group President / Chief Executive Officer (GP/CEO) effective 13-September-2018, pending further notification by the Board. We gather that the move was following the Notice of Inquiry which has been issued to the GP/CEO following the conclusion of internal investigations into 10 critical issues. It was mentioned in the announcement that each of these issues has resulted in financial loss for FGV and its shareholders.

Business as usual in the mean time. FGV explained that the Special Board Committee 2 (SBC2) will take over the GP/CEO responsibilities. The members of the SBC2 are four FGV Directors (Chairman - Datuk Wira Azhar Abdul Hamid, Datuk Dr. Salmiah Ahmad, Dr. Mohamed Nazeeb P.Alithambi and Datin Hoi Lai Ping).

We are neutral on the news. The news is not entirely a surprise as FGV has announced that it was investigating several of its business practices. This is due to "adverse findings" from an earlier probe into its investments.

Earnings estimate maintained. In our view, the Company’s operation should not be affected. Hence, we maintain our FY18 core net loss forecast of RM72.7m. We expect earnings improvement in FY19 with core net profit forecast of RM73.7m (unchanged from previous estimate).

Maintain NEUTRAL with TP of RM1.54. Our TP is based on 1.0x Price To Book. The next key event to watch will be the 3QFY18 earnings which will be released by end of November. Despite the weak earnings prospect in the near term, the share price is trading at its Book Value of RM1.54 hence suggesting limited downside.

Source: MIDF Research - 14 Sept 2018