Asset enrichment

fgv
At the juncture where FGV refused to continue in underwriting medical and hospitalisation bills of gravely ill former FGV Group President and CEO Tan Sri Sabri Ahmad by summarily terminating him from all BoD posts within the FGV Group, there is this damning report about the high value acquisition of multiple non-plantation businesses.
19 Dzulka’edah 1434 H | 25 September 2013
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FGVH’s spending on assets but not settlers raises suspicion

Harakahdaily – TS, 23 September 2013

Sept 23: The RM4.4 billion raised from the initial public offering (IPO) of Felda Global Venture Holding (FGV) has come under scrutiny following several questionable purchases amid the absence of allocation for settlers’ replantation activities.

“Although the figure is big, we see that not a single sen is allocated for replanting activities, and this will give a big problem for Felda in the future,” said PAS economist advisor Rosli Yaakop.

Felda and its 39 percent-owned subsidiary FGV had recently went on a shopping spree, forking RM500 million to acquire Grand Plaza Service Apartments in London, technology house Iris Corp at RM110 million and Grand Borneo Hotel di Kota Kinabalu at RM86 million.

Felda chairman Isa Samad had argued that FGV must diversify its portfolio instead of relying its life on international crude palm oil market.

Last June, Isa said that the proceeds from the IPO had shrunk to RM3.8 billion as at March 2013.

Of the RM3.8 billion, he said RM2.2 billion was allocated to acquire plantation assets, RM840 million to buy selective mills and refineries, RM780 million to expand Felda’s oils and fats downstream segment, RM41 million for capital expenditure and the remainder for loan repayments and other.

Meanwhile, Rosli said it was likely that FGV had exhausted the fund raised from IPO on the purchases without allocating anything for replanting works – a vital move to over FGV’s greatest challenge – to overcome its aging ‘Palm Age Profile’.

It was earlier revealed that 53 percent of Felda’s palm trees are aged 20 years and above, failing the market’s standard of 7 percent.

From the various investments especially in the hotel industry, Rosli said Felda has deviated from its original goal to uplift the Bumiputeras.

According to Kinibiz, Felda Investment Corporation, the newly established Felda’s investment arm has been tasked to take charge of its shareholdings, and manage its eight hotel properties spread out across Perak, Terengganu, Negeri Sembilan, Sabah, and London.

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This serviced apartment acquisition in West End isn’t actually premier brand. Unless, the game is about strategically book building for this hospitality business. Probably, the acquisition of property at the area at these bullish times for property isn’t the best option do a high value ROI exercise.

Then again, FGV should not actively in hospitality business because at the very least, they don’t have the competency for it.

This is on top of following through the controversial acquisition of 16,000ha Pontian Plantations Bhd. in East Sabah, at the price of RM140 per share which is at 30.7 times PE ratio.

FGVH secures 98.81% of Pontian United Plantations

Posted on 18 September 2013 – 05:38am

PETALING JAYA (Sept 18, 2013): Felda Global Ventures Holdings Bhd (FGVH) has succeeded in its RM1.2 billion bid for unlisted Pontian United Plantations Bhd, securing 98.81% of the latter as at last Friday, despite earlier reports which poured cold water on the deal.

In a filing with Bursa Malaysia yesterday, FGVH said it has sent a notice to shareholders to inform them that it received valid acceptances of not less than nine-tenths of the Pontian shares as at Sept 13, 2013, enabling it to compulsorily acquire the remaining shares.

FGVH has extended the closing date of the offer from yesterday to Oct 1, 2013. The offer details remain unchanged.

FGVH on July 18 this year launched a voluntary conditional takeover offer for all Pontian shares, offering RM140 for each share. Given the fragmented shareholding structure of Pontian, with over 30% of the company’s shares held by four different shareholders, market analysts were not optimistic that the deal would go through.

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The Chairman of Pontian Plantations Bhd. is DAP Life Adviser and Former Chairman Dr. Chen Man Hin. It has been argued that the price proposed for the acquisition of Pontian Plantations is exorbitant, which is what above what a shareholder TSH Resources was willing pay exactly the same time last year.

FGV has yet to justify and rationalise all these acquisitions, especially at the price it was paid and how the group business could benefit. At the moment, it would take FGV at least 31 years to recover back the investment at the value they paid for it.

Failure, would just brought forth speculations that there are something dubious in the part or manipulation in the process of valuation, rationalisation and acquisition of these assets. Considering that the AGM is expected to be middle of nest year, where shareholders could raise all these matters.

Especially in the tone where the reputation of FGV Chairman Tan Sri Isa Samad has not entirely been percepived as someone is who ‘clean’. He was once found guilty of ‘money politics’ for seven charges by UMNO Disciplinary Board, during the contest for Vice President post in party elections of  2004. Isa’s UMNO Vice Presidency was stripped and he was suspended for six years. Later, the suspension was commuted to three years.

Then again FGV CEO Emir Mavani is someone who has not been perceived as with impeccable integrity.

There is also this damning rumour in the market about the proposed acquisition of New Britain plantations off Papua New Guinea. The story is about three personalities, which include a member of the investment committee which expected to make USD10 million from the deal had it went through.

It is very important all these rumours and ‘market talk’  are quashed with transparency about he proposed and eventual acquisition. Probably MACC could also do necessary investigations, to ensure that all these acquisitions are in accordance with proper procedure.

Asset acquisition is meant to strategically enrich FGV. Not individuals, especially when they are paid to served the interest of FGV from within.

*Updated 1000hrs

Published in: on September 26, 2013 at 02:00  Comments (21)