Felda’s IPO next year to benefit settlers, others (Part One)

The plan to list Felda’s commercial unit, FeldaHoldings Berhad, has been on the table since it was first announced by former prime minister Tun Dr Mahathir Mohamadin his 2004 Budget but that was where it stayed – on the table – until recently.

Essentially what the public offering will do is to enhance the national economy and bring more benefits to the rural community in particular from having a bigger share of the economic cake.

The listing fits into the second phase of the then New Economic Policy that was launched 40 years ago.

Since that announcement there have been other attempts to realise the plan. There have also been a couple of management changes and restructuring in Felda since but while nothing much happened, the idea was never dropped into the garbage bin.

Now the plan has been put back on the right track, following the recent announcement by Prime Minister DatukNajibRazak in Budget 2012. What has changed is the vehicle: instead of Felda Holdings it’s Felda Global Ventures Holdings Sdn. Bhd. (FGVH) that will be involved in the exercise.

According to FGVH chief executive DatukSabri Ahmad, 112,000 settlers stood to benefit directly or indirectly from this massive corporate exercise. Most of what is required is in place and while the Felda Board will focus on development and a restructuring of community-related tasks, all of the agency’s commercial interests will be the responsibility of FGVH.

Najib’s announcement said that the listing would be realised by mid-2012 and was intended to raise funds to turn the company into a global conglomerate. He also assured that the rights and interests of the settlers will continue to be looked after by KoperasiPermodalanFelda (KPF) which will be the largest single shareholder of FGVH post-listing.

The announcement on the reactivation of the listing plan finally confirmed rumours that had been circulating in the market since a few months ago, especially after the successful listing of sugar manufacturer MSM Malaysia Holdings Berhad last June.

By all accounts, FGVH could potentially be the world’s largest public-listed plantations company. With a land bank of 880,000 hectares, the Felda Group produces about three million tons of crude palm oil a year, which is 8% of the world’s CPO output.

Many of the group’s businesses are placed under FeldaHoldings, which is 49% owned by FGVH. The Ministry of Finance Inc has one golden share while KoperasiPermodalanFeldaholds the rest.

There is also talk that some settlers are uneasy with the plan. President of the National Small-holders Association, DatukAliasakAmbia, the key to a smooth listing depended on how the agency handled sensitive issues like land ownership and how it can convince settlers of the benefits to be gained from the IPO.

He is of the view that any reservations can be put aside if the government can guarantee that each settler is given between 30,000 and 40,000 shares in KPF.

At the moment each settler has shares worth RM6,000. The cooperative has sound liquidity and since 31 years ago, members have enjoyed an annual dividend of 14%. In a good year this went up to 16%. Membership is open to settlers and their families and Felda employees.

Sources said the Felda Global Group had undergone a comprehensive restructuring since the time of president and chief executive Datuk Mohamed Bakke Sallehwho has moved on to head Sime Darby Berhad. This has made it easier for Sabrito bring the agency to a higher pedestal.

With things in place, the focus now is for the management to decide on the best date for the listing. The source said he was confident this could happen as early as during the first quarter of next year.

The planners realise there is only one way for the plan -- and that is it must succeed. A replanting is necessary in many areas due to the age of the oil palm trees but because the CPO price now exceeds RM2,500 per ton, many settlers are reluctant to replant. This is one challenge facing FGVH. To convince the settlers to agree to a replanting scheme, they may be offered a reasonable compensation in lieu of earnings from the old trees.

In a press interview in May, Sabrisaid that one of the targets of the restructuring of Felda Global was to double its profits by 2015. Last year FGVH and FeldaHoldings made RM366 million and RM760 million respectively pre-tax. According to him, about 30% of FeldaGlobal’s income will come more from value-added products and less from downstream operations. Maybank Investment Bank reckons that the profit of FeldaHoldings this year will reach RM1 billion mainly due to the higher CPO price compared to last year.

Read the original post (in Malay) HERE.

Source: MOLE