This article first appeared in The Edge Malaysia Weekly on June 12, 2017 - June 18, 2017

WHEN Felda Global Ventures Holdings Bhd (FGV) made its debut on Bursa Malaysia at the end of June 2012, it was to much fanfare and headlines in both the local and international media. It was the world’s second largest initial public offering (IPO) for that year at US$3.1 billion, after Facebook Inc’s US$16 billion.

It is worth noting that 2012 was a poor year for IPOs globally, as Europe’s credit crisis, the slowing Chinese economy and the lacklustre US economic recovery weighed on the global IPO market.

Five years on, while US-listed Facebook is trading at an all-time high of US$154 apiece, FGV’s shares are at the opposite end of the spectrum. Last Friday, the world’s third largest oil palm estate operator saw its share price close at RM1.66, though it is above its all-time low of RM1.17.

In the five years since its listing, RM13.38 billion, or 60% of FGV’s market capitalisation, has been wiped out. Last Friday, the plantation counter’s market capitalisation stood at RM6.01 billion, less than one-third of its market cap of RM19.4 billion at the end of its first day on Bursa.

Over the same period, the market cap of its peers like IOI Corp Bhd and Wilmar International Ltd fell 13.64% and 5.34% respectively. But Sime Darby Bhd’s and Kuala Lumpur Kepong Bhd’s market cap grew 9.74% and 7.38% respectively.

In the years after its listing, FGV went on an aggressive acquisition trail, making purchases that critics said were too expensive. Perhaps the most frustrating issue for investors and the analysts that covered the company was that these acquisitions did not translate into a higher profit.

In fact, FGV’s net profit has been gradually shrinking, from the financial year ended Dec 31, 2013 (FY2013), when it raked in RM982.25 million, to a meager RM31.47 million in FY2016.

The weak FY2016 performance was caused by higher crude palm oil production cost, low raw sugar prices, impairment losses and provision for mutual separation schemes for the closure of four palm oil mills, the shuttering of a palm oil refinery in Sabah and the impairment on receivables and assets of its downstream segment.

There were also significant losses of RM23.61 million from a joint-venture company where fraud was discovered. FGV’s share price took a bashing when it uncovered fraud at its JV in Turkey, Felda Iffco Sdn Bhd, which ultimately involved a stock loss of RM57 million last year.

FGV has a 50% stake in Felda Iffco, while the other 50% is held by Abu Dhabi-bassed IFFCO, a food manufacturer.

The announcement of the fraud came a day after the plantation company announced its financial performance for its third quarter ended Sept 30, 2016 (on Nov 22), which saw its net loss balloon to RM94.87 million from a year earlier.

Between Nov 22 and 29 last year, FGV’s share price fell 14.79% to RM1.43.

Other than its weak financials, FGV’s high-priced acquisitions have also adversely impacted its share price. The earlier acquisitions include Pontian United Plantations Bhd for RM1.21 billion, Asian Plantations Ltd for £120 million and plantation land from Golden Land Bhd for RM655 million.

There were other deals that fell through, like the proposal to acquire a 55% stake in China-based Zhong Lin Nutri-Oil Holdings Ltd for RM976.25 million.

And who can forget the long-drawn-out deal to acquire 37% equity interest in Indonesian PT Eagle High Plantations Tbk for RM2.4 billion?

When the proposed acquisition of Eagle High was announced on June 12, 2015, a Friday, FGV’s share price plunged as much as 11.3% to close at RM1.65 the following Monday as many considered the deal too pricey.

FGV did not go through with the deal after receiving a lot of flak. Instead, the Federal Land Development Authority, the biggest shareholder of FGV, is looking to buy the stake in Eagle High for RM2.24 billion.

Investors are also wary because FGV, which was listed with a cash pile of RM5.09 billion five years ago, has since FY2015 fallen into a net debt situation. As at Dec 31 last year, FGV’s net debt stood at RM1.97 billion. Now, with the latest saga at FGV how much further will the share price fall? CEO Datuk Zakaria Arshad, chief financial officer Ahmad Tifli Mohd Talha and two other heads of subsidiaries have been suspended and are on indefinite leave of absence for alleged irregularities at subsidiary Delima Oil Products Sdn Bhd.

For now, the counter has seen a slight rebound since last Tuesday’s close of RM1.62, settling at RM1.66 at the close of last Friday.

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