(June 15): Malaysian palm oil giant Felda Global Ventures Holdings's (FGVH) recent purchase of stocks in an Indonesian conglomerate is expensive and will further erode its share price, said Pakatan Rakyat lawmaker Dr Ong Kian Ming.
This move comes as FGVH, a brain child of the Najib administration to lift the incomes of Felda settlers, saw its share price plummet by more than 50% since it was listed three years ago.
Ong, who is Serdang MP, said FGVH must explain to Felda settlers, who are shareholders, the reasons why it bought a 37% stake in PT Eagle High Plantations (EHP) for US$680 million (RM2.55 billion) in cash and stocks.
FGHV bought the stake from the Indonesian-based Rajawali Group.
The purchase was viewed as “negative” by CIMB, Ong said, as FGVH had paid Rp775 per share while EHP’s last closing price was Rp450 per share.
“The acquisition would not give FGVH a controlling stake in EHP.
"The acquisition would dilute FGVH’s net profit in financial year 2016 by 10%, the net gearing ratio of FGVH will rise from 1.05X to 1.43X and the cash flow of FGVH will be negatively impacted,” Ong said in a statement today.
A Reuters report this morning said FGVH’s shares fell as much as 10.2% to a record low of RM1.67, their first day of trading after the deal was made public.
“The answers which the FGV board and management must give to its shareholders which includes the Felda settlers is: why was this acquisition proposed and at such a high price?” Ong said.
He said the company must also explain itself to the public since the Employees Provident Fund (EPF), Retirement Fund Inc (KWAP) and pilgrims’ fund Tabung Haji also owned shares in FGV.
“Will the board and management take responsibility for the negative perception from the market which has led to the continued decline in FGV’s share price?”
Last month, FGVH officials told The Star that low crude palm oil (CPO) prices worldwide and severe floods late last year had affected oil palm production badly and depressed earnings.
These factors were the reason for the fall in the company’s share prices, its lowest since the company debuted on the stock market in June 2012.
A Felda settler group said that the fall in prices had hurt more than 94,000 settlers who bought shares in FGVH and who now pay RM50 a month to service loans taken to buy those shares.
Ong questioned FGVH’s reasons for its dismal performance, saying that FGVH shares had fared the worst among other local plantation companies.
“As of June 12, the stock price of FGV had fallen by 56.6% over the past one year compared to a decrease of 3.2% for United Plantations (UPL), 6.2% for IJM Plantations (IJMP), 8.7% for Genting Plantations and 12.6% for Kuala Lumpur Kepong (KLK).” – The Malaysian Insider