The unconscionable FGV listing

How can we agree to the idea of allowing a smaller business unit that has been making losses for 5 years in a row to take over Felda Holdings? That can only mean it has made serious errors in judgment, careless, wrong businesses to go into and incompetent. Any other lesser known bumiputera would have his ass kicked by a lending institution.

We are treating FGV with the reverence it doesn’t deserve. That’s what FGV is asking to be allowed to do. Transfer the 51% equity belonging to KPF in Felda Holdings, to FGV and then FGV puts up a listing proposal.

FGV has been making losses during 5 consecutive years. We don’t know how much it lost because Felda has not been forthcoming and candid to the PM. The PM doesn’t ask penetrating questions because as he admits, he will speak and debate with responsible only. So, the responsible people are those who tell him what pleases his ears. The felda CEO will tell him we lost a manageable RM 500 million. Felda people tell me, the losses are near RM 2 billion.

How come it made losses? Maybe they chose the wrong business fields. Maybe because they are incompetent. Whatever the reasons are for the accumulated losses, these placed FGV in a weak position to propose a listing with it as leader.

The settlers through their cooperative KPF own 51% of Felda Holding, the arm that actually makes money through a wide variety of businesses.  Through its subsidiary, Felda Plantations, it manages and operates the 360,000 hectares of oil palm estates. They probably earn RM 300 million a year in management fees. Some will go to Felda Plantations; the bulk goes to Felda Holdings.

Felda Holding is the pot of gold. It has more than 70 mills which process the FFB yielding around RM 2 billion a year for Felda Holdings. It has refineries. It has its Felda agricultural services which do research and produce some of the best palm seedlings and plants. FAS probably contribute another RM 500 million to Felda Holdings. Felda Holdings is a conglomerate in itself. Felda Palm Industries own and operate the palm oil mills and refineries we mentioned above. It has business in engineering which is responsible for the construction of facilities; it has business units dealing in rubber, in computers etc.

How much money do these generate? Maybe 4 billion a year.

So this mother lode, the main source of revenue earner is what Felda settlers are surrendering. If they participate in FGV, this 51% will be exchanged for shares in FGV, and that 51% will translate to about 38% in the enlarged FGV. So we then need to ask, will income from holding this 38% exceed the current 51% in Felda Holdings?

The answer is that it’s unlikely because FGV is going to use money raised from the IPO and future retained earnings from plantations to go downstream into oleo chemicals like IOI Corporation, Wilmar International and KLK, the companies that FGV is trying to emulate. But if we look into the published accounts of these companies we can see that they all get far higher returns from plantations (upstream) than in downstream manufacturing. This means that Felda settlers will get less dividends in the future.

Will settlers lose control? Yes, they will lose control of Felda Holdings, the main cash cow, and their 38% in FGV won’t give them outright control. Besides, if they also throw in their land holdings by granting 99-year leases, that land is also gone for 4 generations, a very long time.

That will also mean that Felda will be deprived of some RM 2.5 billion funds thus curtailing it from carrying out welfare work in Felda settlements. Who will compensate for the funds? FGV which is going to run on pure business merits will never set aside money for felda to carry out its social and welfare obligations. FGV thinks the current spending on these unproductive but socially desirable as wasteful.

What it doesn’t think as wasteful are

Eksekutif2 baru ini diberikan gaji yg sangat lumayan sehingga menjangkau RM50,000seorang sebulan (tidak termasuk ealun). Selain itu, kerja2 mudah pentadbiran umpama penganjuran majlis pesaraan kakitangan (sebagai contoh)diserah kepada perunding luar...kononnya org Felda tak reti buat kerja...

Dato' tau tak dari mana gaji2 ini dibayar....tidak lain melainkan diambil dari kantung anak2 syarikat FHB iaitu secara mengenakan Management Fee yg maha tinggi....saya tak pasti KPF (pemilik majoriti FHB) perasan atau tidak akan hal ini...wallahu'alam.

What about the “windfall”? We don’t know exactly what this is, how much it amounts to, but we know where it’s coming from. Its coming from the portion of profit share which felda will get. We won’t know how much yet. But we also need to know, that a portion of its share of profits will be used to pay off the RM 3 billion loan Felda took. Yes sir, Felda did take loans from EPF which is our money.

The windfall will be pure cash that Felda makes from the listing by selling some of the FGV shares that the government (through FELDA corporation, the statutory body under PM’s Dept.) will receive for pumping into FGV its 49% in Felda Holding and also the 360,000 hectares that FELDA Corporation ie government owns. The bigger portion from the listing will go the PM’s department. That is the main reason I suspect, the present PM is also pushing for the FGV listing. He needs the money to play the role he most relishes- Santa Claus. So when he gives the money from Felda’s portion of the IPO profits, what do we call the windfall?  You can call it by the only name it has- a monetary inducement is pure bribery to get the settlers to agree to the IPO, and doubly devious in view of the GE.

Whatever has happened to the original Felda vision, to open land to help the landless poor? It is now going into big business that the settlers don’t understand, can’t control, and makes less money than planting oil palms and making CPO.

That brings me to what Ahmad Maslan, the second rate spokesman for Felda affairs said. If the 360,000 hectares of land are given to second generation settlers, Felda will not get as much money as it can. You see, when the states alienated the land under the terms of the GSA, that land was supposed to be distributed among applicants. That was the reason why states gave up land to Felda in the first place.

The cardinal principle has always been that the best people to handle money are we ourselves. The direct comparison in the context of GSA land- which is a money making resource, is that the best person to handle the land would be the settlers themselves. Why wouldn’t we agree to distribute the 360,000 hectares of land to 120,000 landless people and give them dignity to make good from the money making resource?

So, is this IPO good for the settlers? This is another test for the settlers, mostly Malays. Should they fall for the immediate temptation of the windfall, and sacrifice control and future higher returns? Should they stick with doing things they understand or go into businesses they know nothing about? The government has discarded the original Felda dream. But the settlers can, if they choose, keep it alive by voting UMNO and BN out of office.