By Lee Wei Lian. Published by The Malaysian Insider on 11 September 2012.
The Employers Provident Fund (EPF) has been accumulating shares of Felda Global Ventures Holdings (FGVH) even as shares of the plantation giant sank to a new low yesterday, closing at RM4.68 a share or just 13 sen above its issuing price. According to filings with Bursa Malaysia, the country's largest pension fund's stake in FGVH have increased 5.4 per cent since September 3, the day before FGVH plunged below the RM5 mark.
The pension fund also recently spent RM2.4 billion to take over the Rubber Research Institute (RRI) land in Sungai Buloh that will be turned into a township. It is mandatory for private sector workers to contribute to the fund, which is managed by representatives from the government and unions. EPF now holds a 6.98 per cent stake in the group, up from 6.62 per cent on September 3 and sharply higher than the 5.01 per cent stake it held on July 12.
The plantation group reported disappointing profits for the second quarter, which was down 32.5 per cent from a year earlier due to lower palm oil harvests, increases in operating costs, and lower contribution from its sugar subsidiary MSM Holdings.
FGVH was the second largest initial public offer (IPO) in the world this year and its shares rose 20 per cent in the first day of trading to RM5.46 but have been in a general downward trajectory since. The Malaysian palm oil industry has also been under pressure from low prices, which have declined more than eight per cent this year. Stock piles for the commodity hit 2.13 million tonnes, a 10-month record yesterday sending prices lower for the fifth day in a row.
FGVH could also struggle with its ageing oil palm trees that account for 53 per cent of the 320,000 hectares of oil palm estates which rank among the highest in the industry and a replanting exercise would mean even more loss of income for the group during the period it takes for trees to mature.
FGVH also reportedly suffers from a productivity in terms of tonnes per hectare that ranks as the third lowest among the major Malaysian plantations firms.
HwangDBS Vickers Research has a "HOLD" call on FGVH saying that it offers limited upside to its target price of RM5.05 but the counter also offers a steady cash flow and a 50 per cent dividend payout policy.
Malaysia is the world's second largest palm oil producer, after Indonesia which for years supplied the manpower needs for Malaysian plantations. But the flow of Indonesian workers have stopped in recent years, prompting Malaysia to revisit plans to lift a ban on Bangladeshi workers. Planters say Malaysia needs an additional 40,000 foreign workers if it was to meet this year's target of 19.3 million tonnes output.
Related comment: http://www.themalaysianinsider.com/sideviews/article/tsunami-over-felda-sakmongkol-ak47/
If my friend, Pirates of Putrajaya had been a little bit more patient, he will find his views on the FGV vindicated. Probably he underestimated the will of the government to use GLCs under its control to shore up the FGV price.
Nevertheless, his views will be vindicated soon and I and millions of others hope he will come back into blogosphere to share with us, his rapier sharp analyses.
What Najib is doing right now is just putting out fires. He forgot that it all needed but a single spark to light up the prairie fire.
He has given an advance of RM15,000 each to Felda family. I hear, full payment hasn’t been given out yet. Perhaps Felda will use its gain of RM5.99 billion to pay the balance of what has been promised by Najib. Felda pays unto itself using its own money.
He has given almost RM43 million as raya bonus. Each family got around RM382. That amount was useful to buy cookies, lemang , fresh meats and maybe new curtains for the missus. Because of the drop in FGV share price, he has also announced that Felda will pay for the settlers’ purchase of FGV shares. Once again, that will probably come from the RM5.99 billion.
Finally to placate the settlers’ anger, he has announced that Felda will pay for PTPTN loans taken by the Felda children.
That is his economic strategy. We don’t have to go the Chicago, Princeton, Oxford or Cambridge to do that. Not even Nottingham.
What was the real agenda really? Maybe all this corporate bullshit was about saving FGV. It has done extensive futures trading and had incurred huge losses. That was why some brainy people came up with the idea, the only way to save FGV was to have it buy out KPF’s share in Felda Holdings and go for listing.
At closing time today, FGV share was RM 4.68, earning the holders of the stock a premium of 13 sen. If Najib hadn’t come up with the brilliant idea of ordering Felda to finance settlers’ purchase, each settler ends up with a RM94.70 loss.
Actually FGV bought out Felda Holdings to save itself. It has incurred heavy losses doing futures trading. We don’t know how much FGV got by selling its shares. There was no cash payment involved as the purchase was financed by the issue of new shares which were sold to the public through the IPO. Part of the proceeds were used by Felda to pay its EPF loan amounting to RM6 billion. Then EPF is instructed to buy FGV shares, now it owns 7% of FGV bought for RM 1.2 billion. Foreign interests are selling down to cut down losses.
What is even more pernicious and atrocious is the betrayal to Felda people. 360,000 hectares of land have been forfeited which could be used in future to create 80,000 new settlers.
It's dark days looming over Felda and no amount of PR exercise can mitigate the anger that is shoring up. There is a tsunami looming over Felda. — sakmongkol.blogspot.com
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