When Felda Global Ventures Holdings (FGVH) Bhd was listed in June 2012, 94,219 Felda settlers had bought their allocated 800 shares each in the company. They were offered shares at a 10 sen discount to the retail offering price of RM4.55 per shares.
According to the reply from the Deputy Minister in the Prime Minister’s Department, Dato’ Razali Ibrahim, of the above number, 94,125 settlers or 99.9% of them still held on to their shares.
Unfortunately, these settlers who had held on to their shares would have lost an estimated total of RM177 million based on yesterday’s market closing price of only RM2.09 per share. This is the result of a 53% drop in the share price over the past 2 years.
The shares have performed disastrously despite a strong performance by the Kuala Lumpur Composite Index (KLCI) which appreciated from 1599 to 1855 points (16%) over the same period. FGVH also suffers the ignonimy of being by far the worst performing plantation stock of Bursa Malaysia.
The embarrassing performance by FGVH was despite the solid support by government related funds such as the Employees Provident Fund (KWSP), the Pensions Fund (KWAP), Lembaga Tabung Haji as well as state funds.
Despite the stunning drop in share price, the Minister had insisted that the “FGVH performance is still on the right track to achieve the targets which have been set”. He proudly announced that “operational” profits increased by 10% for 2014 to RM1.03 billion. He further boasted that the Group’s revenue increased by 30.8% to RM16.4 billion while gross profits leaped to RM2.14 billion.
The Minister’s response is a clear case of denial syndrome that will be the harbinger of worse things to come. His citing of the “fantastic” financial statistics is like a doctor telling a patient that his eyesight remains good, despite detecting severe coronary artery blockage which requires a triple bypass surgery.
The 30.4% increase in revenue was achieved due to higher average Crude Palm Oil (CPO) prices of RM2,410 per MT compared to RM2,333 per MT in 2013, as well as the consolidation of revenue from newly acquired plantations.
Despite the improved revenue, FGVH’s net profit for the year plunged by 52.7% from RM1.16 billion in 2013 to RM0.55 billion in 2014. Worse, based on “profit attributable to owners of the Company”, FGVH’s basic earning’s per share was pummelled by 68.8% from 26.9 sen to 8.4 sen over the period.
There is not a single investment bank in Malaysia which rated FGVH as a “Buy” stock, despite its current lowly prices.
The balance sheet of FGVH does not look any healthier. The cash holdings in the company has reduced significantly from RM5.03 billion to RM3.67 billion, while the company remains heavily indebted with its borrowings have increased from RM4.35 billion to RM4.63 billion.
The Chairman of FGVH, Tan Sri Isa Samad together with the top management of the company must take collective responsibility in the poor performance of the company. This is especially since FGVH in its 2012 Annual Report boasted that “FGVH’s stunning debut on the main market in Bursa Malaysia in 2012 was a global sensation. This is just the start of our metamorphosis into a global powerhouse.”
The performance of FGVH over the past 2 and a half years only made the above statement a laughing stock, for not only did the company fail to become a “global powerhouse”, it was a trailing laggard even in Malaysia.
Dato’ Seri Najib Razak, as both the Finance and Prime Minister, who promised Felda settlers the stars during the listing exercise must therefore take decisive action to reverse the decline in the company, before the rot continues and becomes irreversible.