Saturday, February 25, 2012

Comment on Felda listing in Bursa Malaysia

The decision to list Felda Global Ventures Holding (FGVH) is nothing more than an exercise to gain as much profits for those who are the biggest stakeholders in FGVH, a loss-making overseas investment unit that has been run by Prime Minister Najib Razak’s inner circle of financial advisers.

Indeed, Najib has gone to great lengths to justify the need to list FGVH, and paramount to his argument is that this is a means to put more money into the pockets of the Felda settlers. Najib is right in saying more money will fill the pockets of the Felda settlers but as usual, he is NOT telling the whole truth and by far!.
Money will fill the pockets of the settlers, upon the initial listing but in the long run will the settlers be enjoying the bounty as they have been since Felda’s inception decades ago.

Bailout for loss-making Felda Global?

But FGVH subsidiaries such as FELDA Iffco Sdn Bhd, FELDA Global Technologies, FELDA Global Ventures Middle East and FELDA Global Ventures Arabia are reported to have chalked up accumulated losses of around RM500 million up to last year.

The main body as a whole is still profitable. Indeed, FELDA Holdings has a workforce of some 19,000 employees, with a labour force of 46,795 workers at 300 estates, 70 palm oil mills, seven refineries, four kernel-crushing plants, 13 rubber factories, manufacturing plants and several logistic and bulking installations spread throughout Malaysia and several locations overseas.

But critics contend that the proposed listing, which will see loss-making FGVH assume control of the FELDA Investment Co-operative (KPF), will short-change smallholders and saddle FELDA with up to RM1.5 billion in yearly deficit. Thus, the cash-cow Felda Holdings will see itself drawn into debt from the onset and thus affecting every small-holding settler they have under their umbrella.

The whole idea of ‘parking’ a profitable company under the control of one that has proven itself as a poor performer in business, is illogical and makes for bad business sense. Yet this is the plan mooted by the Najib’s establishment. It is as many analysts have warned – a possible exercise to bailout FGVH, which has long been managed by Najib’s inner circle of advisers.

Only the tail-end of the real story told

What Najib and Mahathir used as justification for the listing is the tail end of the story. Once up on the Bursa Malaysia board, new investors will buy up additional share offerings and this will pump in more money into Felda. The money will trickle down to the small share-holders and premium from the share sale can also be used to pay dividends – the wind-fall that Najib and Mahathir allude to.

But the bigger question is, how much shares will the Felda settlers have to hand over in order to create the new offerings for new investors? And who will the new investors be? This is important as essentially, the Felda settlers are handing over their rights over Felda in return for a quick buck. In the long run, the fate of the Felda settlers will be determined by those who hold a controlling stake in listed Felda.

And this the truth that both Najib and Mahathir is holding back from the Felda settlers and Malaysians.
The Najib government says that the move will result in a RM5.9 billion lump sum payment to settlers but the National FELDA Settlers’ Children’s Association (ANAK) has insisted it will not be in cash but in the form of shares in FGVH. This is something to beware of. Settlers may well find themselves stuck with pieces of paper that nobody wants to buy.

Last week, a group of settlers, representing KPF, won a temporary court order blocking the transfer of shares from their co-operative to FGVH, a crucial step in Putrajaya’s plans to list the plantation firm.

Another get-rich-quick scheme for Umno leaders

Both Najib and Felda chairman Isa Abdul Samad are adamant that the listings will go ahead as scheduled. The plan is now to have a special purpose vehicle (SPV) set up to ensure that profits from the listing of FGVH are channeled directly to the settlers; of course, it is any-one’s guess as to who will helm this SPV, but the SPV will take over the role of the KPF. And if Isa’s controversial and unpopular appointment as Felda chief is any measure to go by, settlers can expect the SPV head to also be a Najib ‘yes-man’.

As far as the mechanism goes, Felda, which is 100% owned by the government, will have to buy over KPF’s equity in Felda Holdings Bhd giving them a controlling stake in FHB. When this happens, there will be nothing to stop the transfer of shares from FHB to FGVH and eventually the listing exercise of FGVH.
Indeed, this is a ‘get rich scheme’ that can only benefit those who have the capability to buy the share offerings from FGVH. The IPO effectively takes control from the settlers and serves it to the highest bidder.

“The settlers themselves cannot afford to buy shares and expand the company. So listing is one way to inject more capital and investment. At the end, the settlers will be given the same level of dividend. So, there is nothing to lose,” Mahathir told reporters after launching the Malaysia OSV Owners’ Association (OSV Malaysia) here.

But at what cost to the settlers? Did Mahathir even once considered this? Did Mahathir even once asked himself why the Felda settlers till now have no money to buy shares and expand their company? Who then is Mahathir to say if the IPO is good of bad!

Offering settlers sweets and then selling the sugar factory

In an interview, Tengku Razaleigh Hamzah pointed out that once the listing took place, land belonging to the FELDA settlers will go on the open market. Once exposed to the open market, Razaleigh warned that “anyone” could buy up shares at any amount if they could afford it, and that this could result in settlers losing their lands if shareholders were to sell their shares.

“If the price goes up, and if the shareholders want to profit, of course they will sell (to other people) … it would be stupid not to take advantage of a profit (making) situation. The land that was previously owned will be lost because other people have owned shares and now have rights to the land. That is dangerous,” said Ku Li, a Kelantan prince and the Umno MP for Gua Musang.

This is Najib’s idea of enriching the small-holding settlers of Felda. After promising to give the settlers sweets, he turns around and offers the sugar factory to the highest bidder.

The question that really begs an answer, is why the sudden, urgent need to list Felda? Does this mean that the reports of the Malaysian government running out of cash are true? Or is there another back-to-back deal to siphon out the profits from the IPO to another Umno money-making scheme? Until more whistle blowers come forward, your guess is as good as ours.


                                                  KOMEN YAB DATUK SERI NAJIB







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