KUALA LUMPUR: Felda Global Ventures Holdings Bhd (FGV) plans to raise more than RM1bil selling non-core assets as the world’s biggest crude palm oil producer focuses on plantations to repair investor confidence dented by an acquisition.
Unprofitable crushing and refining businesses in the US and Canada that have drawn initial bids ranging from US$180mil (RM686mil) to US$250mil (RM953mil) may be sold later this month, chief executive officer Emir Mavani Abdullah said in an interview. Holdings in a travel firm, and engineering and information technology units may fetch a further RM300mil, he said.
Shares of Kuala Lumpur-based FGV dropped 14% after opposition lawmakers and analysts said the company overpaid in its purchase of a 37% stake in Indonesia’s PT Eagle High Plantations for US$680mil on June 12. FGV manages 450,000 ha in Malaysia and Indonesia.
“Perception is something that really is affecting us a lot,” Emir said in Kuala Lumpur on Tuesday. The company’s shares were “definitely undervalued,” compared with other plantation companies, he said.
FGV has declined 26% this year. It was the second-worst performer among companies with more than US$1bil market value in emerging Asian nations last year, falling 51%.
Eagle High, purchased from the Rajawali Group, was an “unparalleled strategic fit” because it gave FGV the largest contiguous landbank, Emir said. It also offered access to the Indonesian downstream, fertiliser and seedling markets, he added.
The proposed implied enterprise value for the Indonesian land was about US$17,400 a ha, compared with the US$25,900 Sime Darby Bhd paid for New Britain Palm Oil Ltd, Emir said. The Eagle High acquisition is expected to be completed as early as mid-September, pending regulatory and shareholder approval.
FGV, whose cash coffers halved to RM2.9bil as at the end of March from RM5.7bil in 2012, was considering raising debt to finance the purchase, Emir said. The debt, which would lift the company’s gearing to 1:1, could be in the form of loans or bonds, whichever was most cost-effective, he said.
“We’re looking at all the options we have, including the one to issue bonds,” Emir said.
FGV had RM4.6bil of debt as at the end of March, according to data compiled by Bloomberg. The company has operations in more than 10 countries across Asia, North America and Europe including upstream and downstream palm oil, rubber, sugar and logistics.
Rajawali, one of Indonesia’s largest conglomerates, owns 65.5% of Eagle High, according to data compiled by Bloomberg. Eagle High, through its subsidiaries, has rights to a total area of about 419,000 ha and plantations in Kalimantan, Sulawesi, Papua and Sumatra provinces in Indonesia, its website shows.
FGV might monetise its other plantation estates, which were not under a land-lease agreement with the Federal Land Development Authority, through an initial public offering, Emir said. Talks on the sale were still in the early stages, he said.
Palm oil, currently trading near RM2,200 a tonne, may climb to RM2,500 this year should El Nino curb production, Emir said. Every RM100 per tonne increase in the selling price would add RM150mil to the group’s revenue, he said.
In May, FGV reported a 98% drop in first quarter net income on lower palm oil prices and reduced sales volume. For the financial year ending December, the company’s net income is forecast to rise to RM315.7mil from RM306.4mil in 2014, according to the average estimate of 15 analysts surveyed by Bloomberg. – Bloomberg
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