FGVH shares drifting near record lows

KUALA LUMPUR, Nov 9 — Shares of Felda Global Ventures Holdings (FGVH), the second largest initial public offering (IPO) in the world this year, have slumped in the last one week due to concerns over weak earnings from plantation companies.

The shares of the plantation giant, which were supposed to be a financial windfall for Felda settlers, traded as low of RM4.59 yesterday which is just shy of the record low of RM4.57 recorded on September 11.

File photo of workers gathering oil palm fruits at a factory in Sepang. Plantation companies are under pressure from the current low palm oil prices. — Reuters pic

FGVH closed at RM4.63, which is seven sen lower than on November 1 and just eight sen above its IPO price.

Many settlers had taken loans to buy shares of FGVH and the general downward trend of the share price since its listing on June 28, when it hit a record high of RM5.46, could become a source of discontent.

The government however stepped in to help settlers when it secured a RM361 million allocation from Felda, the government’s land development authority, in August to fully finance 800 units of shares bought by each of the settlers.

The allocation would free settlers from having to pay banks the five per cent interest a year on the loans they took to buy the shares; the settlers would instead repay Felda about RM50 monthly interest-free for five years.

The disappointing performance of FGVH could also temper the buzz over the string of mega new listings that pushed Kuala Lumpur ahead of Hong Kong as the region’s top IPO hub.

Another large IPO — Astro — has also struggled since listing last month, with its shares now down about 11 per cent from its debut.

Only the third high-profile IPO — IHH Healthcare — which was listed in July has managed to stay significantly above its IPO price of RM2.80, closing at RM3.20 yesterday.

Plantation companies have been under pressure from low palm oil prices, which are down by about 25 per cent so far this year and the Plantation Index was down 0.4 per cent yesterday to finish at 8,080.9.

“Investors are cutting exposure to plantation companies due to weak crude palm oil prices,” said one broker.

In addition to low palm oil prices, FGVH could also struggle with its ageing oil palm trees that account for 53 per cent of the 320,000 hectares of oil palm estates which rank among the highest in the industry and a replanting exercise would mean even more loss of income for the group during the period it takes for trees to mature.

FGVH also reportedly suffers from a productivity issue in terms of tonnes per hectare that ranks as the third lowest among the major Malaysian plantations firms.

The Employers Provident Fund (EPF) however has continued to accumulate shares of FGVH, snapping up 250,000 shares yesterday, bringing its total direct stake to 7.78 per cent.

EPF, the country’s largest pension fund, said in September that it was buying into FGVH as it had an extended and positive view on the plantation sector, which is one of the cyclical sectors which has its ups and downs.