Will Felda Global Ventures Holdings Bhd Become The Next 1MDB?

There has hardly been any good news coming from Felda Global Venture Holdings Bhd for the past few years. It had a failed attempt to acquire a stake in PT Eagle High Plantations Tbk in 2015. It called off the deal after huge pressure from both politicians and investors on the high price for the deal. The company then abandoned plans to more acquisitions and simply refocused on consolidating its core operations.

Fraud Uncovered

Since then, The Star has reported that the company has found fraud within its joint venture in Turkey. The fraud might have caused a stock loss in its Turkish unit of more than RM57 million. As it turned out, the fraud case was just the beginning of the problems at Felda Global Ventures.

In June 2017, Bloomberg reported that there have been some irregularities in its accounts associated with Felda Global Ventures’ subsidiary, Delima Oil Products Sdn Bhd. This has led to a full-scale internal investigation in the company and resulted in four of its senior officers, including then-CEO, Zakaria Arshad, to go on leave during the investigation. Malaysia Anti-Corruption Commission (MACC) was brought in and the government sent in former Minister in the Prime Minister’s Department, Datuk Seri Idris Jala, to review the case.

Damage Control Mode

On 20th June, Felda Global Ventures then announced the resignation of its chairman, Tan Sri Mohd Isa Abdul Samad. Tan Sri Sulaiman Mahbob replaced him as acting FGV chairman. This might be an attempt by the government to improve the reputation of Felda Global Ventures. This is because Tan Sri Sulaiman Mahbob is also the chairman of the Minority Shareholders Watchdog Group (MSWG).

The crisis might have surfaced at an untimely period. This is because, just before the crisis, Felda Global Ventures, together with its main shareholder, Federal Land Development Authority (FELDA), was in talks with two Indonesian Businessmen for a possible investment into FGV. FELDA owns about 33.7% of Felda Global Ventures.

The Future Of FGV?

According to news reports, the original plan was for the two Indonesian businessmen to inject some of their assets into Felda Global Ventures, in exchange for a stake in the company. The two businessmen in question are Tan Sri Peter Sondakh and Martua Sitorus. Peter Sondakh controlled PT Eagle High Plantations Tbk, the plantation company that FGV tried to invest in 2015. In an amazing turn of event, the Federal Land Development Authority used its other private subsidiary, FIC Properties Sdn Bhd, to acquire a 37% stake in PT Eagle High Plantations in late 2016.

Martua Sitorus is the co-founder of Wilmar International, one of the largest plantation companies listed in Singapore. Sitorus has recently stepped down as the Executive Deputy Chairman of Wilmar International. According to The Sun Daily, the planned deal was for a reversed takeover by Felda Global Ventures of the Indonesian palm plantations of Sitorus and Sondakh. The company would then use shares as payment for the deal, making the two businessmen major shareholders of the company. It is unclear if the discussion might still continue after the crisis is resolved.

FELDA, Innocent Until Proven Guilty

If you think that the situation in Felda Global Ventures Holdings is complicated, you should read up on what is happening within its main shareholder, FELDA.

A Typical Entrance To A FELDA Settlement

Earlier this month in July 2017, MACC has also started investigating alleged irregularities on its subsidiary, Felda Investment Corporation for the purchase of a luxury hotel in London.  According to initial reports, there have been claims that the London Hotel was bought above market price, and has caused millions of ringgit to be lost from the deal.

Interestingly, MACC chief commissioner, Datuk Dzulkifli Ahmad has commented that the investigation into FELDA is just beginning, hinting that there will be more dirt to be revealed in months to come.

Corporate drama, accounting irregularity and overvalued deals. Are Felda Global Ventures and its main shareholder, FELDA, turning into the next (The 1 That Must Not Be Named) of the Malaysian corporate world?

Who Are The Real Victim Here?

Whatever the result, one thing that is for sure. More often than not, the one that suffered will be the minority shareholders. In FELDA and FGV’s case, it would be the smallholders and their family, who have seen their payment from FELDA delayed. It would be the minority investors those who invested in FGV back during its IPO in 2012. And they are now seeing the share price dropped about 70% from more than RM5.30 per share to the current RM 1.70 per share.

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The information provided is for general information purposes only and is not intended to be any investment or financial advice. All views and opinions articulated in the article were expressed in Stanley’s personal capacity. It does not in any way represent those of his employer and other related entities. Stanley does not own any company mentioned above.

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