Was FGV buy in Indonesia to help PM’s friend, asks Kadir

“The purchase was in direct contravention of a 26 December 2014 directive by the Ministry of Finance that all GLCs temporarily halt investments abroad. There can’t be any exceptions.”

KUALA LUMPUR: A veteran newsman has taken to his blog to express concern that Felda Global Ventures Bhd (FGV) may be another worrisome factor given the ongoing 1MDB scandal and in the wake of its foray into Indonesia to take a 37 per cent stake in plantation giant PT Eagle High Plantation (EHP). “The speculation is that FGV, and given the continuing decline in its share prices, may as a result be delisted and taken private.”

“The purchase was in direct contravention of a 26 December 2014 directive by the Ministry of Finance that all GLCs temporarily halt investments abroad. There can’t be any exceptions.”

EHP was part of the huge Rajawali Group of Companies in Indonesia while Sondakh, reportedly close to Prime Minister Najib Abdul Razak and purportedly his Adviser on Indonesia, has been listed as among the nine richest men in the country.

FGV paid USD680 million (RM2.5 billion) in cash and shares for a 95 per cent stake in a sugar plantation owned by Rajawali, the holding company, he noted.

For starters, pointed out former New Straits Times Group Editor in Chief Kadir Jasin, FGV paid 800 rupiah per share on the Indonesian Stock Exchange while the market price was 400 rupiah per share. “The purchase appears to have been made to assist Rajawali’s owner Peter Sondakh. His recent attempt to float a gold mining venture fell through and he was under increasing pressure.”

Sondakh, said Kadir, has also obtained easy financing from Malaysian banks for his St. Regis hoel and convention centre in Langkawi. “He sold a substantial stake in Excelcomindo Pratama to Telecoms Malaysia in 2000, and with the proceeds went on to buy Khazanah Nasional’s hotel properties in Kuala Lumpur and Langkawi.”

“It would have been more logical to get the EHP shares at a discount in a depressed market where out of it’s 419,006 hectares, only 147,298 hectares had been planted while the rest are still forested.”

FGV appears to be very generous, he lamented, although it had its own problems like its falling share prices at home, the weakness in the palm oil market, and the recent devastating floods in December-January which caused damage and hit its production.

Hence, the question that also arises was whether the timing was right.

Already, he said, FGV’s profits for last year dropped to RM826.4 million from RM1.56 billion the year before. “For the first quarter this year, its profits dropped by 98 per cent to RM3.6 million while its shares have plunged from RM4.55 in 2012 to RM2 this year and RM1.85 on June 11. A drought is being blamed.”

“FGV was forced to hand over more shares to EHP than vice versa.”

He concedes that on the surface the investment appears part of a sound strategy and in line with the Malaysian Government’s objective of positioning the GLC as a multinational plantation giant by venturing abroad. “The government no longer allows forests in the country to be felled for plantations. The only way was to go abroad to get more plantation land.”

However, he reiterated, there’s more to it than meets the eye.