This article first appeared in The Edge Malaysia Weekly, on March 13 - 19, 2017.
FELDA Global Ventures Holdings Bhd (FGV) is in talks for a strategic, long-term shareholder to buy into the company. The details and terms are still being ironed out, but the deal is slated for completion by year end.
“We are talking to various parties, internal and external,” FGV CEO and president Datuk Zakaria Arshad tells The Edge on the sidelines of the Palm and Lauric Oils Price Outlook Conference & Exhibition last week.
“Now, it’s very cheap for them [interested parties] and we are looking for a strategic, long-term investor, not a short-term investor. [With the latter], when the price goes up, they sell. You can see from our share price, when it’s up a little, people sell, so we must do something about it. Actually, we don’t want to have to deal with all this, we want to eliminate this,” he says.
FGV closed last Friday at RM1.83. It had traded at its highest of RM4.82 on July 4, 2012, just after its initial public offering. In 2013, its shares were trading at an average of RM4.01, and remained at this level for most of 2014.
From early November 2014 until end-August 2015, FGV’s stock shed more than 65%, hitting an all-time low of RM1.16 at end-August. Since then, it had risen to a high of RM2.52 in September last year, before declining to the current level.
FGV went on an acquisition spree between 2012 and 2015. It forked out RM2.2 billion to buy the remaining 51% stake in Felda Holdings Bhd that it did not own from its substantial shareholder, Koperasi Permodalan Felda Malaysia Bhd, in October 2013. It also bought 836.1ha of plantations in Sabah from Golden Land Bhd for RM655 million cash, acquired Sabah-based Pontian United Plantations Bhd for RM1.2 billion, and bought Asian Plantations Ltd, which was listed on the Alternative Investment Market (AIM) of the London Stock Exchange, for RM628 million, among others.
After Zakaria took over the reins of FGV from Datuk Mohd Emir Mavani Abdullah in April last year, he scrapped plans to buy 55% of China-based edible oil producer Zhong Ling Nutril-Oil Holdings Ltd for RM976.25 million. More importantly, he called off plans to buy 37% of PT Eagle High Plantations Tbk from Tan Sri Peter Sondakh for US$680 million or RM2.89 billion then.
The Eagle High acquisition plan was mooted in June 2015 and took a lot of flak as the price was deemed high.
While Zakaria declines to reveal more information, he says the strategic shareholder coming into FGV is not Tan Sri Syed Mokhtar Albukhary, or anyone linked to him.
“No, not with that group [Syed Mokhtar’s], this is a different group, which is related to us. We want to have an associate that needs us and we need them, so that is what we are looking for,” he says.
News reports in July last year had said that Syed Mokhtar was in preliminary talks to buy into FGV, but this was denied by the company. However, talk of Syed Mokhtar looking to inject his plantation assets into FGV has been making the rounds since 2013 — barely a year after the company’s listing, and soon after the tycoon had privatised his plantation and property assets held under Tradewinds Corp Bhd, Tradewinds (M) Bhd and Tradewinds Plantation Bhd.
Asked if the group buying into FGV is related to the Federal Land Development Authority, Zakaria replies that it is a user of FGV products.
“[The new entrant] is linked to our products. It will complement us. We don’t want mere investors ... then, we worry that when they see money [when the share price goes up], they will sell off our shares.
“What we want now are investors that are also in the business so they too, will be looking for long-term growth. We want to grow together with them,” he explains.
Asked if it is an Indonesian party, he says, “No, no, I cannot reveal anything, we are in talks ... when the time comes, we will reveal everything.” On whether it will be via a placement of shares, he says “it’s still under discussion”.
On FGV’s share price, Zakaria says, “To me, it’s still undervalued. I don’t know why the price is so low now, but in the share market, there are a lot of things like sentiment, things that we cannot control. We are now focusing on delivering good results. When we deliver good results, only then can we eliminate all this perception.”
For its financial year ended December 2016, FGV recorded RM29.61 million in net profit from RM17.28 billion in revenue, compared to a net profit of RM188.79 million and RM15.56 billion in sales the previous year.
In its notes accompanying its financials, FGV attributed the dismal earnings to lower contribution from upstream operations that resulted in a decrease in fresh fruit bunch production; an impairment on four palm oil mills amounting to RM11.81 million due to a rationalisation exercise; lower contributions from its sugar segment, largely held under 51% controlled MSM Malaysia Holdings Bhd; the palm oil downstream segment incurring a loss of RM52.85 million; and the closure of a palm oil refinery in Sabah that resulted in an impairment of RM17.80 million.
For the current year, Zakaria says, “God willing, it will be better than last year.”
Save by subscribing to us for your print and/or digital copy.
P/S: The Edge is also available on Apple's AppStore and Androids' Google Play.