Is FGV still all right?

By Xavier Kong

Tiger is concerned about the direction that FGV is moving in. With its share price falling and the group’s income weakening, is FGV really still doing all right?

Tiger was going over the numbers that Felda Global Ventures Holdings Bhd (FGV) had posted for the first half of its 2015 financial year, and what Tiger sees is worrying. The following numbers (admittedly back-of-the-envelope) should show why Tiger is concerned.

Over its entire listed period, FGV had watched its share price fall from RM5.50, the highest point on July 4, 2012, to the current slump the group is in, hovering around the RM1.22 mark.

FGV has about 3.64 billion shares, which in turn leads to the deduction that FGV had fallen in value from RM20.02 billion when its share price was at RM5.50, to the current value of RM4.44 billion, when its share price is around the RM1.22 mark.

However, a better, and possibly fairer, measuring point is the initial public offering price for FGV, which was RM4.55. This places the group’s initial value at RM16.56 billion, which marks a drop of about RM12.12 billion in value for FGV.

Tiger would like to point out that the significant losses in value began near the end of May 2014, when FGV started slipping over the past 15 months from RM4.54 per share, just shy of its IPO price, to its current RM1.22 per share, as of the close on Sep 9. This represents a 73% fall in the group’s share price performance.

At the same time, FGV has been reporting deteriorating results, with the full-year profits of its 2014 financial year coming in at RM306.3 million, compared to the full-year profits of its 2013 financial year, when FGV had reported a profit of 982.2 million.

Comparing the year-to-date profit from its 2015 financial year, FGV came in with a profit of 49.6 million for the first half of 2015, compared to the RM295.4 million that the group reported for the first half of 2014.

Now, is it clear why Tiger is worried? Not yet? That is because Tiger has not mentioned the major shareholders of FGV.

Look towards the primary shareholders of FGV, which include several statutory bodies, such as Kumpulan Wang Persaraan, Koperasi Permodalan Felda Malaysia Bhd, as well as Lembaga Tabung Haji, Permodalan Nasional Bhd, and the Employees Provident Fund, all of which had invested in FGV during its listing exercise.

As it stands, it can technically be said that FGV had been making choices, acquisitions, and decisions using the funds provided by organisations tasked with helping the rakyat grow their money.

However, in Tiger’s opinion, FGV does not seem to be doing what it is supposed to do to repay its shareholders, nor does it seem like FGV is interested in the trust these shareholders had placed upon it to grow.

The most recent example of this has to be the proposed acquisition of Eagle High Plantations, a subsidiary of the Rajawali Group, for a sum of RM2.55 billion.

FGV, there is such a thing as proper timing. As it goes, Tiger is of the opinion that this is definitely the wrong time for this deal to take place. Not only is sentiment weak in the local market, but FGV is supposed to pay part of the RM2.55 billion in US dollars, and the remainder in FGV shares? Well, it seriously should not take a Tiger to tell you this, but as sentiment stands, the proposal will see a boatload of opposition, as shown by the 11% drop in share price that FGV saw following the announcement of the proposal.

That, FGV, is just how much investors disapprove of the deal, that they would sell their shares, their faith, in your group. With the series of questionable acquisitions to your name already, it is really no surprise to Tiger that shareholders have had enough.

Sure, FGV is looking to ask for a discount regarding EHP, due to issues found during due diligence, but with no official circular or announcement to Bursa Malaysia, and no solid details to all this, it is really difficult for shareholders to begin to trust in FGV again.

Even the latest disposal of Twin Rivers Technologies Holdings Entreprises de Transformation de Graines Oléagineuses du Québec Inc (TRT-ETGO) over in Canada, which FGV had put about RM267 million into and is disposing for about RM610 million, is being faced with distrust and scrutiny from some quarters, as it is believed that the proceeds would go towards the EHP deal.

FGV, there has to be a limit. Enough is enough. It is time to let go of the EHP deal, and concentrate on turning the group around organically.

Shareholders, Tiger would also like to remind you to exercise your right to influence the direction in the group, and to vote in the general meeting that should be called to decide on the proposal. That one vote could be the one that makes the difference.

GRRRRR!!!