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Felda listing: A ‘house of lies’

 | July 2, 2012

Felda Global Venture is a rush job and has all the hallmarks of becoming a minefield for Prime Minister Najib Tun Razak.

COMMENT

With a bottomless pit of scandals and irregularities, Prime Minister Najib Tun Razak must be off his rockers when he says he will win 14-0 in the next election.

But I know, the only time he has to say something like that, is when he knows the chips are down.

We know when Najib says he will win 14-0, it means Umno and Barisan Nasional are finished. Otherwise, with a score of 14-0, Najib should have declared election yesterday.

Let’s talk about the Felda Global Venture (FGV) which was listed on June 28.

Najib wants to rake in RM6 billion to pay his way through the next general election.

But did you know that know that only 20% of Felda top management supported the idea of FGV’s initial public offering (IPO)? Some 65% of the FGV staff thought FGV simply isn’t ready to list.

This is obviously a rush job and we must keep asking, why?

From the beginning we have been saying: if settlers’ welfare and economics are the prime concern, then allow KPF (Koperasi Permodalan Felda) to buy out FGV. Then KPF will own 100% of Felda holdings and all the assets therein.

Then what is to stop KPF from forming or hiring a first-rate management company to run its business?

KPF as the settlers’ keeper will then look after settlers’ welfare directly. Felda doesn’t even have to list FGV as it’s out of orbit completely.

But that would be the honest road to walk.

Felda, a ‘minefield for Najib’

Najib’s current world, however, is pretty much constructed by consultants. They provide him with the idea and he goes out there to promote what he thinks are earth-shattering ideas.

And if readers are interested to read about the make-believe world consultants construct, they may want to read House of Lies.

Now, lets see the initial idea. The idea of a listing was mooted by CIMB.

Ethos Consulting was brought in as global project coordinator. They brought in the calvary – Hay Group, Boston Consulting, Aeon Hewitt and maybe more.

Their advice: Don’t touch KPF, treat it like a leper.

The way I see it, the FGV listing has all the hallmarks of becoming a minefield for Najib.

What is the immediate effect of the FGV IPO?

The listing will allow 94.5 % of the subscribers who are not even Felda settlers ride on the broken backs of Felda folks.

Felda settlers get 91 million shares while 1.3 billion shares are taken up by state governments, government-linked companies (GLCs) and cornerstone investors – PNB, EPF and Tabung Haji (each have been asked to take up 20%).

Five state governments, including my home state of Pahang, are also being arm-twisted into taking up 30% shares.

Meanwhile, 420 million shares are set aside for rich individuals who must show they have a least RM3 million in assets and companies worth RM 10 million.

No future

An increasing number of Felda people are becoming more sceptical by the day.

The FGV prospectus is fast acquiring the stature of the bikini version of statistical information – what it reveals is suggestive but what it hides is vital.

For instance, we have not been told that only 3% of Felda landbank is RSPO certified (Roundtable on Sustainable Palm Oil).

This means in future, we may find it difficult to sell CPO (crude palm oil) to the world market because much of the landbank from where the CPO comes from is not RSPO-certified.

Also, because we haven’t shown commitment to RSPO, FGV’s plan expansion of plantations in places like Indonesia and Africa may not progress as fast as FGV wants.

Where are the fundamentals to support the business? The productive trees? The market? The price? The industry?

Over 50% of the trees in Felda plantations need to be replanted. That translates into higher costs.

The cost of cultivating a new field is about RM15,000. If 53% of 355,864 hectares need to be re-planted, it will cost RM2.8 billion on replanting alone, spread over five years.

And if you find additional planting areas, you can only reap what you sow in three to four years.

New areas to be planted means more cost and a waiting period.

Dropping demand

Demand from big buyers is slowing down. China and India, for example, are cutting back their purchase of CPO. Malaysia is not the only supplier of CPO.

Indonesia is becoming more competitive and can unload its CPO onto the market, dampening the price of Malaysian CPO.

The fundamentals are not favourable to Malaysia. That being the case, you can’t sustain the price post-listing for long.

This rush job is likely to see Felda and FGV in the same position as ailing MAS (Malaysia Airlines System).

The writer is a former Umno state assemblyman but joined DAP earlier this year. He is a FMT columnist.


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