KUALA LUMPUR (Sep 14): The suspension of FGV Holdings Bhd (FGV)’s group president and chief executive officer, Datuk Zakaria Arshad, while could be viewed negatively in the short term, is unlikely to move the market, according to analysts.

MIDF Research’s Alan Lim in a report today wrote that the suspension, pending further notification by the board, is not entirely a surprise as FGV had announced that it was investigating several of its business practices.

“This is due to ‘adverse findings’ from an earlier probe into its investments,” Lim said.

Similar to Lim, CIMB Research’s Ivy Ng Lee Fang, also said in her report dated yesterday, that the news is not totally unexpected as FGV's chairman had told reporters in a press briefing on Sep 3 that he would not rule out the possibility that the top management of FGV might be removed in view of “adverse findings” uncovered during a forensic investigation.

“This also follows yesterday (Sep 12)’s announcement that the Ministry of Finance has removed Datuk Zakaria as the government-appointed director to FGV’s board of directors. A key point to note is that Datuk Zakaria’s contract ends in Mar 2019,” Ng noted.

The trading activities on FGV shares has been relatively muted with its price slipping lower by 0.65% or 1 sen to RM1.53 with only about 689,400 shares traded. In comparison, the 30-days volume of FGV was at about 6.0 million shares.

The suspension of Zakaria was announced by FGV yesterday following the conclusion of internal investigations into 10 critical issues.

While both Lim and Ng believed that the announcement was largely expected, Ng highlighted in her report that the vacuum in the Group’s leadership could be viewed negatively in the short-term, pointing that FGV’s share price fell by 7% on the day that Zakaria was suspended for the first time back in June 2017.

Recall that Zakaria only returned to work on Oct 2017 after about four months of leave of absence following the suspension back in June 2017 pending an investigation on alleged irregularities in certain transactions between a subsidiary of FGV, Delima Oil Palms and Safitex.

Ng also noted that this event appeared to be part of the Group’s turnaround initiatives conveyed by FGV board earlier at an analyst briefing and is in line with CIMB Equity Research’s expectation of a potential shake-up in its management.

She maintain a hold call for FGV with a sum-of-parts (SOP) target price of RM1.67.

Similarly, Lim, who believed that the Group’s operations will not be affected by the uncertainties over its leadership at this point in time, also maintained a neutral call on FGV with a target price of RM1.54.