PETALING JAYA – Koperasi Permodalan Felda’s (KPF) recent disposals of Felda Global Ventures Holdings Bhd (FGV) shares are part of the cooperative’s trading activity and do not affect their long term commitment as a substantial shareholder.
While the issue may have been misinterpreted by some quarters as a sign of diminishing confidence in the group by KPF, FGV has come out to unequivocally state that this is not the case.
“There are two portions to KPF’s shareholding in FGV. One is the trading portion while the remainder is the 5% stake which is a long term holding. It is perfectly normal for them to take profit as part of their trading activity,” said FGV chief executive officer Datuk Zakaria Arshad during a meeting with StarBiz.
Sources familiar with the matter told StarBiz that KPF’s selling activity will eventually amount to a total of 11 million shares.
This would bring down the co-operative’s stake in FGV to some 200.1 million shares or a 5.5% stake.
Yesterday, stock exchange filings showed that KPF had sold another 3.77 million FGV shares on Feb 6.
This means that KPF will remain as FGV’s fifth largest shareholder after Kumpulan Wang Persaraan (Diperbadankan) (7.07%), Lembaga Tabung Haji (7.87%), Felda Asset Holdings Co Sdn Bhd (13.66%) and the Federal Land Development Authority (17.29%).
While major institutional funds do trade part of their investments from time to time – particularly to realise substantial short term profits – KPF’s move to sell the FGV shares admittedly raised some questions.
The substantial shareholder has seen the value of its holdings in FGV deteriorate from its initial public offering price (IPO) of RM4.55 back in June 2012.
In 2015, FGV shares hit an all time low of RM1.15 before staging a strong recovery thanks to improved fundamentals and stronger crude palm oil (CPO) prices. The shares closed at RM1.90 yesterday.
KPF, which is set up to facilitate investments on behalf of Felda settlers, declared a dividend of RM262.28mil for the financial year ended Dec 31, 2015 (FY15), compared to RM260.9mil for FY14 according to its latest available financial report.
On the other hand, KPF’s financial performance has been on a downturn. Its net profit at the group level for FY15 amounted to RM134.15mil, down from RM304.78mil in FY14.
It is worth noting this can be partly attributed to the underperformance of the FBM KLCI which declined by 8% over the two year period (2014-2015). The cooperative also holds stakes in numerous public listed companies on Bursa Malaysia as part of its investment portfolio.
On FGV’s own prospects, Zakaria said that he is confident that the group is on track to achieve its targets for the 2016 financial year.
He has previously pledged to report up to RM100mil in savings for the full year period following an extensive cost-cutting exercise.
He added that the group estimates that CPO prices are well supported at the RM3,000 per tonne level at least until April due to the lower inventory numbers currently.
According to Malaysian Palm Oil Board (MPOB) data, the physical settlement price for CPO on Feb 7 stood at RM3,322 per tonne, or the highest in nearly five years.
“This year you will see further improvements in our cost of production and fresh fruit bunch output. Our sizable replanting efforts will bring the benefits in 3-4 years as by then our estates will have an average tree age profile of 12 years,” he explained.
On the issue of its Turkish subsidiary company Felda Iffco Gida Sanayi, which saw FGV incur a RM57mil loss as part of its 50% shareholding in the venture, Zakaria told StarBiz that previously implemented safeguards may allow the group to recoup some of the declared losses.
Last year, the group discovered fraudulent activities relating to the Turkish ventures which resulted in the losses being incurred.
“The partners did take out a fraud insurance for the project. The prospect of recovering a major part of the losses and a write-back (of the assets that were previously written off) is there. We are hopeful of a satisfactory outcome,” he noted. FGV is set to announce its fourth quarter earnings for the period ended Dec 31, 2016 (Q4FY16) on Feb 22.