This article first appeared in Forum, The Edge Malaysia Weekly on June 12, 2017 - June 18, 2017

More trouble at Felda Global Ventures Bhd (FGV) ... yes, the same company that shared the limelight with Facebook in 2012 as two of the world’s largest companies to go public.

One was the world’s largest social media company by subscribers. The other was the world’s largest palm oil planter by acreage.

Since that fateful year, Facebook’s share price has exploded, while FGV has lost two-thirds of its value.

In the years since, FGV’s revenues have been on a declining trend, while the billions in cash raised from the IPO (2012: RM5.7 billion) have also depleted by roughly two-thirds (2016:RM1.9b).

Net income, meanwhile, has shrunk to meagre double-digit millions (2016: RM33 million) from the bumper RM1.01 billion it booked in 2013, the year after its market debut.

Consider, however, FGV’s performance since the appointment of president/CEO Datuk Zakaria Arshad on April 1, 2016.

In its most recent reported quarterly performance (1Q2017), Zakaria had swung the ship around, booking a tidy RM2.5 million profit from a hefty RM81 million loss a year earlier (incidentally, the quarter preceding his appointment).

And, as the New Straits Times points out, costs have been cut (by RM131 million last year, including at the estate level) even as fertiliser application has risen, boosting yields.

Meanwhile, the new organisational structure he introduced in early 2017 has streamlined company management into three sectors: plantation, logistics and sugar.

In turn, the formation of a Treasury Management Committee has given it better control over volatile currency fluctuations, critical for a company that does business in international commodity markets, in both upstream as well as downstream markets.

Even FGV’s stock has improved.

Last week, even after the savage selldowns and downgrades in the wake of Zakaria’s forced leave of absence following allegations of corruption, the counter still stood at RM1.65, 10% higher than when he was appointed.

So, what could possibly have happened to this “planter’s son who turned Malaysia’s worst stock into its best in 120 days”? (Bloomberg’s words, not mine.) A Felda lifer, who has been with the company since 1984 when he began his career as an administration and marketing manager with Felda Rubber Industries Sdn Bhd?

Zakaria’s media interviews just before his forced leave are quite telling.

In an interview in The Star earlier last week, he spoke of his objections to FGV’s proposed investments in non-core businesses like nanocarbon manufacturing (of about £100 million pounds, or RM551 million at current levels) and creamer production (of some RM300 million).

He said, and here I quote: “Why do I want to put [this money] towards non-core businesses? There are other examples [of] direct negotiations, direct contracts. I’ve been entrusted with managing the company but when I want to enforce strictly, then this is what happens.”

Without wanting to pre-empt investigations and the due process that must surely ensue from this most serious of disruptions to an already troubled business, a truism is that a great deal of FGV’s problems have stemmed from misdirected and costly investments that have diminished its cash pile and distracted management from its core business of palm growing and downstream processing.

In the five years since its IPO, Felda and its associated companies have dived into all manner of unrelated “investments”, including serviced apartments in London, hotels in Kota Kinabalu, electronic passports with Iris Corp, sturgeon farming in Pahang, high-end restaurants (Savaro by Felda) and even bakeries and pastry shops (Schneeballen Pastriesz).

The selfsame investments that Felda chairman Tan Sri Shahrir Samad admitted earlier this year would require “blood in the street” to repair, as settlers “don’t want to hear stories about the agency buying hotels in London, its officials living like lords, whole family members going to London for a holiday ... the top people seem to enjoy everything.”

Fast forward to the present, and one can now surmise that the proponents of these investments and FGV’s procurement practices, whoever they are, are presumably the impetus behind Zakaria’s exile.

Which is unfortunate, because if his exit is confirmed, that could mean more woes ahead for FGV’s long-suffering shareholders. And further affirm its unwanted status as being among the worst of Malaysia’s many basket-case companies, given its size and influence.

Another impasse and another crossroads for FGV and its board to navigate then. What more, in what is probably an election year, where the importance of Felda as a vote bank for the establishment parties is obviously critical.

Felda’s sprawling influence in the rural heartland means that its settlers — and how they view this latest infraction — will be critical since there are an estimated 54 constituencies with Felda voters in about a quarter of the 222 parliamentary seats at stake.

To end, this quote from Felda chairman Shahrir: “What is needed is to get back the confidence of the staff, settlers and the market. If the leakages stop, the settlers will settle down.”

Ball in your court, FGV.

Again.

Khoo Hsu Chuang is an associate editor at The Edge Malaysia

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