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Felda Global surges on KL listing debut
Felda Global Ventures Holdings Bhd, the world’s third-biggest oil palm planter, jumped as much as 20 percent in its Kuala Lumpur debut, after raising US$3.3 billion in the biggest initial public offering since Facebook Inc.
“Foreign investors haven’t been allocated sufficient shares,” said Alan Richardson, who helps oversee about US$87 billion as a money manager at Samsung Asset Management Co in Singapore. “An over-demand situation is likely.”
Demand from institutions exceeded supply by more than 40 times during the IPO, Felda Chief Executive Officer Sabri Ahmad said in an interview on June 20. Unlike Facebook, the plantations group priced the stock below the top of its indicative range. The world’s largest social network company has slumped since its debut in May, while Felda rallied to RM5.46 (US$1.71) in the first 14 minutes of trading in Kuala Lumpur today.
The state-controlled company could have received more than RM4.55 per share from institutions, though decided not to after allocating 90 percent of the available stock to Malaysian subscribers, Sabri said. “We wanted to put something on the table for them to enjoy,” he said.
With an initial market capitalization of RM16.6 billion, Felda will qualify to join the 30-member FTSE Bursa Malaysia KLCI Index. Funds that track the gauge would be obliged to buy the shares in the open market if they failed to get allocation during the initial sale.
“People who didn’t get the shares want to,” said Abdul Jalil Abdul Rasheed, who helps manage US$3 billion as chief executive officer of Aberdeen Islamic Asset Management Sdn Bhd in Kuala Lumpur.
Resilient Market
Malaysia has withstood a global stocks sell-off brought on by Europe’s debt crisis, which has seen at least US$12.3 billion of first-time sales scrapped or delayed globally since the start of this year, according to data compiled by Bloomberg.
The KLCI index, which reached an intraday record this week, has risen 2 percent since Felda priced shares on June 14, outperforming a 1.1 percent gain in the MSCI Asia Pacific Index. Felda Global is ranked the equivalent of buy with an average price target of RM5.53 by four brokerages surveyed by Bloomberg, including Public Investment Bank Bhd.
“The food business is quite resilient to recession,” said Sabri in Kuala Lumpur. “As long as China and India keep on buying oils and fats, the demand is there. The debt crisis shouldn’t have a big impact.”
Cornerstone Investors
State funds including Permodalan Nasional Bhd, Lembaga Tabung Haji and the Employees Provident Fund Board were among so-called cornerstone investors for its share sale.
“The strength of the Malaysian IPO market is that you have a lot of domestic liquidity, which ensures that real demand cannot fully be satisfied,” said Samsung Asset’s Richardson.
IHH Healthcare Bhd, Asia’s biggest hospital operator, has similarly signed up local pension funds among its 22 cornerstone investors, for more than 60 percent of its share sale in Kuala Lumpur next month. IHH plans to raise about RM6.4 billion, two people familiar with the matter said June 15.
Felda, which also produces rubber and sugar, reported a 46 percent drop in profit to RM192.2 million for the three months ended March 31. This was partly because of accounting changes after a business structure revamp, Chief Financial Officer Ahmad Tifli Mohd Talha said in a phone interview.
Relative Value
The Felda shares were priced at 14.2 times estimated full- year earnings, a person familiar with the matter said June 14. This compares with 14.7 times at local rival Sime Darby Bhd, the world’s largest palm-oil company by acreage, and 9.9 times at Singapore’s Golden Agri-Resources Ltd, data compiled by Bloomberg show.
Facebook’s 28-year-old founder Mark Zuckerberg persuaded investors to pay about 107 times reported earnings, a higher price-to-earnings multiple than almost every company in the Standard & Poor’s 500 index.
Felda “won’t tank, it won’t be like Facebook,” Lye Thim Loong, who helps manage US$500 million at Libra Invest Bhd in Kuala Lumpur and subscribed for the Malaysian company’s shares, said before the debut. “It’s not as expensive.”
Felda, the largest shareholder of sugar refiner MSM Malaysia Holdings Bhd, has 355,864 hectares (879,359 acres) of leased or managed palm and rubber plantations in the Southeast Asian nation.
It also has land in Indonesia, as well as overseas palm oil refining businesses, soybean and canola-crushing operations and a U.S. oleochemicals plant, the prospectus shows.
Global Ambition
“We want to be a global player,” Sabri said. The company intends to use part of its IPO’s proceeds to expand its palm oil upstream operations in Indonesia and venture into Africa. Cambodia and Myanmar are being targeted for rubber and sugar respectively, he said.
The group is part of the Federal Land Development Authority, a government agency formed in 1956 with World Bank funding to help steer the rural poor out of poverty by providing them with land to plant. Key to its creation was Abdul Razak Hussein, Malaysia’s second prime minister and father of current leader Najib Razak.
Najib, who must call elections by early next year, announced windfall one-off payments to plantation workers and their families, known as settlers, amounting to RM1.69 billion on May 8. A trust will be set up to hold 20 percent of Felda shares for planters after the IPO so that they can reap dividends, he said.
“Political patronage will always be high as Felda has over 112,000 settlers who vote in many key rural constituencies,” Khor Yu Leng, an independent agribusiness analyst, said in an e- mail interview. -- Bloomberg
Felda Global Ventures Holdings Bhd, the world’s third-biggest oil palm planter, jumped as much as 20 percent in its Kuala Lumpur debut, after raising US$3.3 billion in the biggest initial public offering since Facebook Inc.
“Foreign investors haven’t been allocated sufficient shares,” said Alan Richardson, who helps oversee about US$87 billion as a money manager at Samsung Asset Management Co in Singapore. “An over-demand situation is likely.”
Demand from institutions exceeded supply by more than 40 times during the IPO, Felda Chief Executive Officer Sabri Ahmad said in an interview on June 20. Unlike Facebook, the plantations group priced the stock below the top of its indicative range. The world’s largest social network company has slumped since its debut in May, while Felda rallied to RM5.46 (US$1.71) in the first 14 minutes of trading in Kuala Lumpur today.
The state-controlled company could have received more than RM4.55 per share from institutions, though decided not to after allocating 90 percent of the available stock to Malaysian subscribers, Sabri said. “We wanted to put something on the table for them to enjoy,” he said.
With an initial market capitalization of RM16.6 billion, Felda will qualify to join the 30-member FTSE Bursa Malaysia KLCI Index. Funds that track the gauge would be obliged to buy the shares in the open market if they failed to get allocation during the initial sale.
“People who didn’t get the shares want to,” said Abdul Jalil Abdul Rasheed, who helps manage US$3 billion as chief executive officer of Aberdeen Islamic Asset Management Sdn Bhd in Kuala Lumpur.
Resilient Market
Malaysia has withstood a global stocks sell-off brought on by Europe’s debt crisis, which has seen at least US$12.3 billion of first-time sales scrapped or delayed globally since the start of this year, according to data compiled by Bloomberg.
The KLCI index, which reached an intraday record this week, has risen 2 percent since Felda priced shares on June 14, outperforming a 1.1 percent gain in the MSCI Asia Pacific Index. Felda Global is ranked the equivalent of buy with an average price target of RM5.53 by four brokerages surveyed by Bloomberg, including Public Investment Bank Bhd.
“The food business is quite resilient to recession,” said Sabri in Kuala Lumpur. “As long as China and India keep on buying oils and fats, the demand is there. The debt crisis shouldn’t have a big impact.”
Cornerstone Investors
State funds including Permodalan Nasional Bhd, Lembaga Tabung Haji and the Employees Provident Fund Board were among so-called cornerstone investors for its share sale.
“The strength of the Malaysian IPO market is that you have a lot of domestic liquidity, which ensures that real demand cannot fully be satisfied,” said Samsung Asset’s Richardson.
IHH Healthcare Bhd, Asia’s biggest hospital operator, has similarly signed up local pension funds among its 22 cornerstone investors, for more than 60 percent of its share sale in Kuala Lumpur next month. IHH plans to raise about RM6.4 billion, two people familiar with the matter said June 15.
Felda, which also produces rubber and sugar, reported a 46 percent drop in profit to RM192.2 million for the three months ended March 31. This was partly because of accounting changes after a business structure revamp, Chief Financial Officer Ahmad Tifli Mohd Talha said in a phone interview.
Relative Value
The Felda shares were priced at 14.2 times estimated full- year earnings, a person familiar with the matter said June 14. This compares with 14.7 times at local rival Sime Darby Bhd, the world’s largest palm-oil company by acreage, and 9.9 times at Singapore’s Golden Agri-Resources Ltd, data compiled by Bloomberg show.
Facebook’s 28-year-old founder Mark Zuckerberg persuaded investors to pay about 107 times reported earnings, a higher price-to-earnings multiple than almost every company in the Standard & Poor’s 500 index.
Felda “won’t tank, it won’t be like Facebook,” Lye Thim Loong, who helps manage US$500 million at Libra Invest Bhd in Kuala Lumpur and subscribed for the Malaysian company’s shares, said before the debut. “It’s not as expensive.”
Felda, the largest shareholder of sugar refiner MSM Malaysia Holdings Bhd, has 355,864 hectares (879,359 acres) of leased or managed palm and rubber plantations in the Southeast Asian nation.
It also has land in Indonesia, as well as overseas palm oil refining businesses, soybean and canola-crushing operations and a U.S. oleochemicals plant, the prospectus shows.
Global Ambition
“We want to be a global player,” Sabri said. The company intends to use part of its IPO’s proceeds to expand its palm oil upstream operations in Indonesia and venture into Africa. Cambodia and Myanmar are being targeted for rubber and sugar respectively, he said.
The group is part of the Federal Land Development Authority, a government agency formed in 1956 with World Bank funding to help steer the rural poor out of poverty by providing them with land to plant. Key to its creation was Abdul Razak Hussein, Malaysia’s second prime minister and father of current leader Najib Razak.
Najib, who must call elections by early next year, announced windfall one-off payments to plantation workers and their families, known as settlers, amounting to RM1.69 billion on May 8. A trust will be set up to hold 20 percent of Felda shares for planters after the IPO so that they can reap dividends, he said.
“Political patronage will always be high as Felda has over 112,000 settlers who vote in many key rural constituencies,” Khor Yu Leng, an independent agribusiness analyst, said in an e- mail interview. -- Bloomberg
