As stock price plunges, DAP MP asks if FGVH going the way of MAS

KUALA LUMPUR, Dec 3 — Felda Global Ventures Holdings Bhd (FGVH), the world's third largest oil palm planter, may face financial ruin like flag carrier Malaysia Airlines (MAS) if Putrajaya fails to immediately to halt the company’s slide, DAP MP Tony Pua warned.

The Petaling Jaya Utara MP noted that FGVH's financial performance has continued to deteriorate after it posted its first quarterly loss of RM12 million for the quarter ending September 2014, forcing the plantation giant's stock prices to plummet to as low as RM2.99 since the announcement.

As of Monday, Pua said in a statement here, FGVH's stock value closed at just RM3.08, a 42.9-per cent decline from its offer price of RM5.39 in June 28, 2012.

"Datuk Seri Najib Razak, as both the finance and prime minister, who promised Felda settlers the stars during the listing exercise must therefore take decisive and immediate actions to stem the decline in the company," the federal lawmaker said.

"Otherwise, the latest loss incurred by FGVH may signal the start of another winding road to financial collapse just like the Malaysian Airlines System."

In 2012, FGVH set the record for having the world's second-largest initial public offering (IPO), raising a total of RM9.93 billion based on an institutional price of RM4.55 and a final retail price of RM4.45 per share.

The stock price for Malaysia's second-largest plantation company by planted area that debuted on the Main Market of Bursa Malaysia — the official name of the Malaysian Bourse — was at RM5.39 on June 28, 2012.

FGVH's stock value, however, went into a tailspin almost immediately after its listing. FGVH chairman Tan Sri Isa Samad had said in August 5, 2013 that the situation was due to uncertain oil palm prices.

Deputy Minister in the Prime Minister's Department Datuk Razali Ibrahim recently reiterated Isa's position, telling Parliament in a written reply to Pua dated October 13 this year that FGVH's performance suffered from a drop in global demand for and price of crude palm oil (CPO).

But Pua scoffed at the justification, saying that other plantation firms would have mirrored FGVH’s decline if its poor performance was solely attributable to crude palm oil prices.

Over the past six months, Pua said, FGVH was the "worst performer" of all plantation stocks listed on the Malaysian bourse.

Citing data from October 15 this year, the lawmaker noted that FGVH stock dropped by 29.1 per cent compared to its peers: IJM Plantations (6.3 per cent drop), IOI Corp (2.7 per cent), Genting Plantations (9.4 per cent) and Sime Darby (1.6 per cent).

The closest poor performer was KL Kepong, whose price dropped by 16.6 per cent over the same period, he said.

"Therefore, with the latest results, it is clear that the worsening performance is caused by factors well beyond just falling commodity prices," Pua said.

"The results," he added, "showed that there is a clear drop in productivity."

For example, Pua said FGVH managed to reduce its total palm fresh fruit bunch (FFB) production by one per cent in the first nine months of 2014, despite having added around five per cent of additional mature palm oil area from the RM1.2 billion acquisition of Pontian United Plantations last year.

The decline, he said, was blamed on the lower rainfall.

"However the excuse can barely hold water because comparatively, Malaysia’s average FFB production actually increased by three per cent over the same period," Pua pointed out.

"FGVH may remain profitable for the current financial year. However, the signs are crystal of a consistent deteriorating performance," he said.

"Will it (FGVH) become another Malaysian Airlines System?" Pua asked.

After racking up losses worth over RM4.13 billion in just three years and losing two of its planes to separate tragedies this year, MAS is currently undergoing a major RM6 billion restructuring aimed at turning the airline profitable within the next three years.

The ailing flag carrier was delisted in August after sovereign wealth fund Khazanah Nasional Bhd offered to buy out its minority share for a total of RM1.38 billion to restructure MAS.