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

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

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

Monday, October 31, 2011
  • felda
"Under the IPO exercise, FGVH will lease land from Felda and the settlers under a long-term concession arrangement."

The Federal Land Development Authority or Felda that was established in 1956 will undergo a transformation which will take it further forward when FeldaGlobal Ventures Holding Sdn. Bhd. FGVH) is listed next year.

 

But although this plantations and agro-based conglomerate will become a Plc, its objectives and soul will largely remain unchanged from the original idea decided decades ago. In fact it will be better.

 

Not many may be aware but Felda as an agent of (economic) change has not received a cent from the government since 1996, thus relying entirely on internally-generated funds and lifting a big burden off the government in the annual national budget.

 

The present shareholding in Felda Holdings is divided between KoperasiPermodalanFelda (KPF) with 51% and the balance with FGVH that was formed in 2009 to facilitate and coordinate all the operations and business dealings of the Felda Group. The role of FGVH now is purely as the management for all commercial activities.

 

Following the listing KPF will have an equity of 30%), states with Felda schemes 20%, government institutions and investment agencies also 20%), Felda’s international strategic business partners between 10 and 15% and the balance offered to the public.

 

Under the IPO exercise, FGVH will lease land from Felda and the settlers under a long-term concession arrangement.

 

Considering Felda’s liquidity and its annual revenue, which for last year was RM1.4 billion, there is no strong need to urgently go for floatation. But the listing exercise per se is not meant raise money. Rather it is intended to give better opportunities and value for the major stake-holders to have a stake in a profitable venture.

Strategic international partners will also be given the opportunity to ensure that the commercial links are not unnecessarily disrupted.

As for settlers, their average investment in KPF stands at RM6,000each although the maximum allowable is RM250,000. At the moment only 62 of them have put in the maximum amount and this is regrettable since the average annual returns has been a consistent 14%.

 

If every settler invests the maximum amount, the total raised will be a whopping RM28.16 billion and at 14% that will be RM4.2 billion each year to be shared. Also, Felda’s assets now are worth RM8 billion. Imagine if this value is unlocked.

 

Of the 850,000 hectares of land now under Felda, 500,000 hectares are owned by the settlers. The listing will not in any way alter the status of the settlers’ land.

 

In addition FGVH will guarantee that Felda will receive at least RM1 billion each year to ensure that its operations and development projects are not disrupted.

 

After a restructuring of all the companies in the Felda Group, it will focus on five sectors including oil palm, sugar, logistics and delivery and also downstream activities. It is projected that FGVH will make a pre-tax annual profit of RM2 billion post-listing.

 

With this exercise the assets of FGVH, either injected or given through concessions, will be unlocked to realise their actual market values. The added value post-listing is expected to come to between RM5 and RM6 billion. This translates into Felda being worth between RM14 and RM15 billion at this time next year.

At an average yield of 19% from plantations, the annual revenue of FGVH should be at RM2 billion and although the yield is lower than the industry’s best of about 24%, the amount is still substantial given the fact that it’s primary objective is still tied to the overall government socio-political perspective

 

FGVH will also be responsible for all replanting plans that have been Felda’s responsibility all along. This will ensure maximum benefits from the plantations and that they gel with market demands. Better coordination and supervision of all the companies and other parties that deal with Felda will only result in better trade practices and corporate governance and reduce leakages, thereby adding more value to the agency’s assets.

 

The original post (in Malay) can be found HERE.