This article first appeared in The Edge Malaysia Weekly on July 10, 2017 - July 16, 2017
IT is interesting that so much negative news can emanate from one company — Felda Global Ventures Holdings Bhd (FGV) — and more so that most of it is being disseminated by the Federal Land Development Authority (FELDA), its largest shareholder with a 33.67% stake.
“Is there a need to keep FGV’s stock depressed?” asks a plantation company official who spoke on condition of anonymity. “The bad news just never ends and it’s the parent that is spreading it and suppressing FGV’s price.”
The thing is, nobody really knows what is going on at FGV.
Just last week, on July 5, a newswire broke a story that FELDA’s plan for Indonesian billionaires Martua Sitorus and Peter Sondakh to buy into FGV had been suspended. The tycoons were supposedly in advanced discussions with FGV and FELDA to buy into the former.
The report says, “A deal could have boosted FGV’s finances and given it a chance to reverse at least some of the 70% declines seen in its share price since its IPO in 2012.”
Indeed, FGV’s initial public offering in 2012 was done at RM4.55 a share. The stock closed at RM1.70 last Thursday.
But the talks with the Indonesians were never confirmed and their buying into FGV was never a sure thing. So, it seems premature to conclude that the suspension of the deal impacted FGV adversely.
The next day, however, The Wall Street Journal quoted FELDA chairman Tan Sri Shahrir Abdul Samad as saying that “FELDA has no plans to sell its stake in FGV to anybody”, more or less confirming that the talks with the Indonesians were off.
Just a day before, Shahrir had described the feud between FGV’s management and board as a “crisis”, which does not bode well for the company.
In the middle of last month, FGV’s board had issued show-cause letters to president and CEO Datuk Zakaria Arshad and chief financial officer Ahmad Tifli Mohd Talha, among others, with regard to long outstanding debts owed by Afghan outfit, Safitex Trading LLC, to Delima Oil Products.
Zakaria and Ahmad Tifli are understood to have replied to the show-cause letters and to be waiting for a verdict. What is surprising is that the domestic enquiry is expected to take two months.
A senior official of a plantation company scoffs at the time frame. “The evidence and all the relevant investigations should already have been gathered. It’s a simple process now … merely a yes or no process. So, why would it take two months? It indicates how seriously they want to make right what’s wrong at FGV.”
Coming back to FGV, the feud saw chairman Tan Sri Isa Samad leave the company. But this led to the washing of FGV’s dirty linen in public and much of what came out indicated bad governance.
The dispute between Isa and Zakaria also resulted in the Malaysian Anti-Corruption Commission coming in and confiscating documents, which further spooked investors.
Shahrir has been bashing FGV since he was appointed FELDA chairman in early January this year. But some of his allegations against FGV are misplaced.
In an interview with a business daily in mid-June, Shahrir talked about FGV buying hotels in London after its IPO but these acquisitions were undertaken by Felda Investment Corp Sdn Bhd, under FELDA. Ironically, Shahrir says in the article, “I just want FGV to get its act right and get it together.”
Blundering along
And that was not his only blunder. In end-April, Shahrir was quoted by a news portal as saying that he wanted to end a land leasing arrangement with FGV and take back FELDA’s land banks. About 335,000ha are leased to FGV for a fixed annual payment of RM250 million and it is worth noting that 15% of FGV’s annual profit is derived from the leased land bank.Signed in 2012, the lease is valid for 99 years.
However, a month later, Shahrir said FELDA had not finalised any decision on the termination of the land lease agreement. “We don’t have a date or timeline that we are working for because we have to refine this issue so that the benefits can be enjoyed by both FELDA and FGV,” he told the media at an event.
Now, a little more than a month later, all the talk of the land lease termination has subsided.
This is similar to the talk of privatising FGV, which was rife late last year and early this year, but then abruptly denied.
It seems the plan to privatise FGV was merely an option after Felda Lab (led by Pemandu) analysed the company’s business operations and came out with a proposal. But why are FGV’s corporate strategies and proposals being shared with the world?
Other decisions border on the comical. In a much-publicised move, Datuk Seri Idris Jala of Pemandu fame was tasked with coming up with a solution for FGV, although in such cases, most listed companies would discreetly hire an accounting firm to come up with a solution so as not to shake investor confidence.
Shockingly, Jala had a report ready in just seven days on how to tackle the issues at FGV.
“If he (Jala) could have a thorough report ready in one week on a giant company like FGV, maybe he should run it,” quipped one market watcher.
The way FGV is being hammered, one would think the rest of FELDA was in great shape. But all the entities in FELDA’s stable are performing poorly.
FIC Properties Sdn Bhd has not had a CEO since March this year since the last one was investigated for graft. As at end-December 2015, FIC Properties was not generating revenue.
Property developer Encorp Bhd, in which FELDA holds a 70.82% stake, closed at 75.5 sen last Thursday. FELDA had paid RM1.55 per share or RM306.11 million for the block in 2014.
Encorp was profitable in FY2016, registering a net profit of RM28.53 million on revenue of RM360.82 million. However, in FY2013, it had registered a net profit of RM61.13 million on revenue of RM538.71 million.
As for IRIS Corp Bhd, FELDA had bought into the company at 26 sen and 28 sen apiece or for a total of more than RM130 million. The stock is currently trading at 17.5 sen. FELDA, which now owns 21.33% of IRIS, had sold large blocks of the company’s shares at below cost.
In its financial year ended March 31, 2017, IRIS posted a net loss of RM318.95 million on revenue of RM422.48 million.
Meanwhile, FELDA’s acquisition of a 37% stake in PT Eagle High Plantations Tbk from the Rajawali group is supposedly a done deal, which would mean that Peter Sondakh is now flush with cash. But according to Shahrir, FGV is not for sale.
With all that is going on at FGV and FELDA, will either entity see light at the end of the tunnel anytime soon?
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