Analysts maintain FGV’s FY18 estimate despite material litigation
KUCHING: Analysts have maintained their financial year 2018 (FY18) earnings estimate for Felda Global Ventures Holdings Bhd (FGV) despite the group’s recent material litigation.
To note, FGV’s board of directors in a Bursa filing on Monday said its subsidiaries, Felda Global Ventures Research & Development Sdn Bhd (first defendant) and Felda Agricultural Services Sdn Bhd (second defendant), had been served with Kuala Lumpur High Court Writ of Summons together with a Statement of Claim on April 5, 2018 by the plaintiff Fulle Technik Sdn Bhd (Fulle Technik).
Back in September 2014, FGV RD has appointed FTSB to develop a prototype machine known as Subsoil Fertiliser Machine (SFM).
Fulle Technik alleged that the FGV RD has -- in breach of their contractual obligations -- appointed a third party via an open tender to build and supply the SFM. In this regard, Fulle Technik claimed against FGV RD and FAS.
As per announcement, Fulle Technik is claiming against FGV RD and Felda Agricultural a total amount of RM23.39 million in special damages, interest at the rate of five per cent per annum on general damages, interest at the rate of 2.5 per cent per annum on special damages, exemplary damages, interest at the rate of five per cent per annum on the judgment debt from the date of judgment to the date of full settlement, costs incurred and other reliefs as deemed fit by the Court.
“This material litigation against the first defendant and the second defendant may have a material financial impact on the company which total amount shall include but not limited to the claimed amount plus legal fees and costs.
“The company will make the necessary announcement on further development of the Fulle Technik suit in due course,” FGV said in the filing.
In spite of this latest development, the research arm of MIDF Amanah Investment Bank Bhd ( MIDF Research) maintained its FY18 core net profit (CNP) forecast of RM106 million at this juncture pending further details from FGV.
On the other hand, MIDF Research lowered its target price to RM1.75 per share, from RM1.96 per share previously, as the research arm lowered its price to book target from 1.23-fold to 1.1-fold.
The research arm used mean valuation, from + 0.5 standard deviation valuation, to account for earnings risk from this material litigation.
“Despite the reduction in our target price, we do not foresee significant downside to share price as the company has been registering core net profit in the past two quarters suggesting more sustainable earnings trend.”