FGVH defends RM1.2b PPUB buy

Felda Global Ventures Holdings Bhd chairman Isa Samad says that purchase was made as a fair value.

by Azli Jamil

PETALING JAYA: Felda Global Ventures Holdings Bhd (FGVH) defended its decision to spend RM1.204 billion to buy Pontian Plantations United Bhd (PPUB) saying the deal is not expensive and comparable to the recently reported deal between IOI Corp Bhd and Unico-Desa Bhd that cost about RM1 billion or RM73,000 per hectare.

“We bought PPUB at a cheaper price than the IOI deal,” said FGVH chairman Isa Samad in Kuala Lumpur yesterday.

Isa said the purchase is at a fair value and explained that the deal took some time to conclude due to the steps and processes that FGVH, as a listed company, has to follow.

FGVH CEO Mohd Emir Mevani Abdullah qualified that the PPUB purchase includes mills and RM250 million cash in its kitty, and at RM65,000-RM67,000 per hectare, the price is lower than the market price and not high as many analysts have opined.

“PPUB’s plantation which is in Sabah will also give a higher yield,” said Mohd Emir, adding that the land in Sabah is on a 999-year leasehold, which is good according to him.

FGVH will still have about RM2.6 billion left from its initial public offering (IPO) proceeds of RM4.46 billion after the PPUB deal.

Mohd Emir said the company will continue to use the money to build its upstream capacity, including land acquisitions in places like Myanmar and Cambodia mainly for rubber.

He said FGVH is doing due diligence on buying land in West Africa for plantation use, adding that Africa presents great opportunity for the company to expand.

Moving forward, Mohd Emir is cautiously optimistic about the future price of crude palm oil (CPO).

“The price of CPO will peak in the first-quarter of 2014 where we could see CPO trading within the RM2,400- RM2,500 per metric tonne (pmt) from the current price of about RM2,350 pmt,” said Mohd Emir.

Mohd Emir said FGVH will also monitor and optimise cost to maintain profitability of the company, while reiterating that FGVH would not sway from its core business of oil palm, rubber and sugar.

Mohd Emir said PPUB’s estate in Kukup, Johor, will remain as plantation land, refuting past reports that it might be converted for property development.

The Kukup land enjoys proximity with the Tuas highway that links Johor and Singapore.

With regard to dividend policy, Mohd Emir said FGVH will maintain and abide by its dividend policy of a minimum payout ratio of 50% of its net profit.

For the financial year ended Dec 31, 2012, FGVH paid a total dividend of 14 sen per share.

The dividend payout represents 64% of profit after tax, higher than the 50% payout as promised in the prospectus during FGVH’s IPO exercise in 2012