The Chinese Chauvinist Democratic Action Party (DAP) has now actively involved in the effort to derail FELDA Global Ventures Holdings (FGVH) IPO scheduled for 28 June 2012. The latest is by Petaling Jaya MP Tony Pua. Pua charged that FGVH IPO is based on ‘inflated profits’ and now its being cannibalised.
‘Cannibalising’ Felda listing bad for settlersTeoh El Sen
| June 18, 2012
The public listing of palm oil giant Felda Global Ventures Holding Sdn Bhd is canibalising its subsidiaries in order to artificially inflate its attractiveness, says Tony Pua.
KUALA LUMPUR: DAP lawmaker Tony Pua alleged that the public listing of Felda Global Ventures Holding Sdn Bhd (FGVH) is potentially detrimental to both settlers and employees.
He said this is because profits of FGVH are being “artificially” inflated by cannabilising on the profits of its subsidiaries.
The listing is scheduled to take place at the end of this month.
Pua revealed today that a concession contract signed on March 1 between FGVH and Felda Palm Industries Sdn Bhd (FPI) “forces” the latter to sell all of its crude palm oil to FGVH.
Previously, FPI would purchase raw palm oil from plantations and sell it directly to refineries, traders and other users.
“This means FPI can’t sell to outsiders anymore. This essentially creates a toll gate, an intermediary, or middle man. Instead of FPI selling direct to the end users, FPI has to sell to FGVH,” said the Petaling Jaya Utara MP and DAP national publicity chief.
“Why do they want to sell through a third party when they can sell direct?” he asked.
Pua said FPI is 64.7% owned by Koperasi Permodalan Felda (KPF). KPF, in turn, is 70% owned by Felda settlers and the rest by Felda employees.
“The travesty in this is that KPF does not own any shares in FGVH. [Therefore], the biggest loser will be KPF, and the Felda settlers 70% and Felda employees,” he said.
Putting in the assumption that FGVH would make a 5% margin in sales prices from the “one-sided deal”, Pua said that it would amount to a RM405 million lost to FPI.
He said that in 2010, FPI made RM9.5billion and RM204 million in revenue and profits respectively when it sold three million metric tonne of CPO for RM8.1 billion that year.
He said this deal, together with his previous allegation that the government was “fleecing” settlers RM8.8 billion through the leasing of KPF land, is simply how the government “hoodwinks” the people.
“The RM15,000 ‘durian runtuh’ [windfall] amounting to a total of RM1.69 billion does not even come close to the loss of income for KPF and the settlers for the next 99 years as a result of the above one-sided deals.
“We call upon the government not to shortchange KPF and Felda settlers. Don’t hoodwink the people by robbing them of future income,” he said.
“It is clear from these two exercise, moving the land away from KPF subsidiary, as well as signing an agreement where FPI is forced to sell its CPO to FGVH. The government is boosting the earnings of FGVH and the attractiveness of its shares to potential investors while at the same time sacrificed the interest of Felda settlers represented by KPF by robbing them of income which they’ve enjoyed all these years,” he said.
FGVH listing is reportedly Asian’s biggest IPO yet and the world’s second biggest after Facebook, and is expected to raise RM10.5 billion with a projected market capitalization of more than RM16 billion to pave way for Felda’s expansion with the plantation giant looking at becoming the world’s leading palm oil producer.
Observers believe the IPO would likely increase Prime Minister Najib Tun Razak’s winning chances in the 13th general election
Firstly, the new business model eliminating FPI’s risk in CPO trading margin since traded price is based on MPOB monthly average (current month) in tandem with FFB price. Therefore the profitability of FPI remains the same or even better as compared to the previous model.
The rational of FPI selling CPO to FGVH is straight forward. The new business model was purposely developed to protect FPI from suffering a negative margin in CPO trading during uncertainty market. This exercise will also enable FGVH to support midstream and downstream business in the group.
Pua’s charge of FPI loss RM405 million assuming 5% margin in trading (in a one-side deal) is rather manipulative. FPI sells CPO to FGVH based on MPOB monthly average price. There is no guaranteed margin in CPO trading. In fact, by selling CPO to FGVH at MPOB price, the trading risk is eliminated since FFB price was determined by daily MPOB price.
For Pua to manipulate KPF’s ownership in FPI without being a shareholder of FGVH is purely designed to agitate the majority of non FELDA settlers in the 220,000 membership of KPF. KPF is 100% owned by settlers and employees. KPF will not be a loser because the profitability of FPI remains the same or even better as compared to the previous model. In addition, through this model, KPF stakeholders are protected from negative margin in CPO trading.
The issue about the 350,000ha of KPF land being leased to FGVH is not true. The land that was leased belongs to FELDA Authority, not KPF.
20% of FGVH shares would be in the hands of an SPV, expected to be a newly created FELDA Asset Holdings Corporation Bhd. The purpose of the SPV is to realize all the profits and filed derived from FGVH dividends declared and it will channel these income for the purpose of 112,635 FELDA settlers. Since the economic benefits of 20% of FELDA shares will flow down to settlers via the settler trust fund, anything that is good for FGV is good for settlers.
It is obvious that DAP through Tony Pua is attempting to create a deep dissatisfaction amongst the 1.2 million warga FELDA in their strategy against the New Economic Policy (NEP), designed to alleviate the economic position of rural Malaysians especially the Malays and narrowing the gap with the Non Malays. It is an extension of Opposition’s ‘Politics of Hatred’.