Friday 29 Mar 2024
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KUALA LUMPUR (Feb 6): Lion Forest Industries Bhd (LFIB)’s former subsidiary, Sabah Forest Industries Sdn Bhd (SFI), has finally ended a seven-year long legal battle with UNP Plywood Sdn Bhd, with a RM85 million settlement agreement.

According to a filing with Bursa Malaysia, LFIB (fundamental: 1.65; valuation: 1.2) said SFI will pay UNP Plywood a lump sum of RM85 million by Feb 13, 2015, as “full and final settlement” of the latter’s claim.

Recall in 2007, UNP Plywood — a timber contractor — had sued SFI for RM128.87 million, for wrongful termination of extraction and purchasing agreements.

LFIB had disposed of its interests in SFI in 2007, to JP Morgan Special Situations Asia Corporation and Ballarpur Industries Ltd, for US$261 million cash. Under the disposal agreement, the buyers have retained from the consideration, an amount approximate to the contingent liabilities arising from the UNP Plywood’s claim.

As there was already a provision of RM15 million made in the previous financial years, the settlement is expected to result in a loss of RM70 million or 30 sen per LFIB share in the financial year ending June 30, 2015.

On a proforma basis, the settlement is also expected to reduce LFIB’s net assets by RM70 million or 30 sen per LFIB share, based on the audited financial settlements of LFIB as at June 30, 2014.

The settlement will, however, have no material impact on the gearing of the LFIB group.

LFIB's share price closed unchanged at 79 sen, giving it a market capitalisation of RM182.94 million.

(Note: The Edge Research's fundamental score reflects a company’s profitability and balance sheet strength, calculated based on historical numbers. The valuation score determines if a stock is attractively valued or not, also based on historical numbers. A score of 3 suggests strong fundamentals and attractive valuations.)

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