Listing of FGV- looking our for settlers interests

I am more interested in establishing credibility in a proposition, idea or plan. Accordingly I am not fixated over an idea nor feel xenophobic on having to change my position if necessary, in the interest of achieving credibility. For example, while I am not immediately taken in by the idea of listing Felda Global, the rational economist in me accepts that it makes good business and economic sense to restructure Felda’s business to unlock value. I

think, even while some of us differ in our views, this principle of restructuring, reorganizing, changing in order to arrive at better value, is acceptable. Also I am not averse to having experts run and operate the business. Example- KPF is the investment entity in Felda Holdings. The members of KPF get dividends, handouts, charity, assistance etc. they are able to enjoy because the commercial entity, Felda Global Ventures Sdn Bhd does the business for them. KPF’s and the interests of others- public spirited individuals, minders (paid or unpaid) are to ensure the managers of the business do their work efficiently and create shareholder value.

Except that, I will always be circumspect about the term ‘unlocking value’. Translate that into action and practice, what does the term mean? This term ‘unlocking value’ has taken different meanings in the context of business in Malaysia. It can mean anything. In the sad case of MAS for example, unlocking value has meant the sale of assets and the management of balance sheet bypassing managing the operations of the business.  The truth is, a business depends more on managing its operations.

My understanding in unlocking value is however somewhat more basic- it means you produce more per acre if you are in the business of planting something, you get better price, you produce better quality, produce new products, become more productive, keep costs down. It’s a bricks and mortar view of how an economic enterprise operates. You operate the real economy. Goods and services. It’s the business operations.

As an analyst or investor I will look at these variables and parameters. At the same time, I have this cynical bias- no business unit can sustain profit on paper shuffling and share manipulations without the support of the business fundamentals. I am always suspicious at the managing balance sheet approach. You want to arrive at a clean balance sheet; you manage the assets and liabilities. You are fixated at the over consuming idea of having more value at assets over liabilities.

In felda’s case that means to me, making sure plantations produce more and high quality yields, marketing, managing more efficiently and so forth. Creating prosperity through share manipulations, IPO and the stuff are initial spurts. What comes later- working on the fundamentals is what sustains long term benefits.

A close friend sent me a text. He says he doesn’t understand why I oppose the FELDA Global ventures (FGV) listing. Don’t I empathize with FELDA settlers? The indirect owners of the 880,000 hectares of palm oil trees are going to enjoy a windfall and you are objecting?  Settlers are passive investors through their cooperative. The business and commercial aspects of the business has always been handled by Felda Global Ventures SB. That is the organization that operates and manages the business. Doesn’t it make good business and economic sense to restructure the business into a single entity and create upstream and downstream business entities?

The most important element of this business in my mind is the land area. Now, these 880,000 hectares comprise of what? The land already owned by settlers or land not already owned by settlers or both? Since 1990, Felda doesn’t enlist settlers anymore. Land not already owned by settlers or were not given out were all placed under Felda Plantations. These are not operated by settlers. They are run directly by Felda through their plantation business units.