Felda to sell off overseas assets

KUALA LUMPUR (Jan 18): Confirming that it is paring down its stake in Malayan Banking Bhd (Maybank) to raise money, cash-strapped Federal Land Development Authority (Felda) disclosed yesterday that it also wants to dispose of some of its overseas assets.

Newly appointed Felda chairman Tan Sri Shahrir Abdul Samad (pictured) said the agency hopes to raise between RM500 million and RM1 billion from the sale of the assets abroad.

“You will see more disposals this year, particularly overseas assets, like the hotel [in London],” he told a press conference. “We are looking to dispose [of the hotel] for more than RM500 million. The return from the hotel investment doesn’t justify us to stay in the industry, but the value [of the asset] has appreciated,” he said.

Felda, through its wholly-owned subsidiary Felda Investment Corp Sdn Bhd (FIC), owns the four-star Grand Plaza Hotel in London’s upmarket Kensington area which it bought for £60 million (then equivalent to RM330 million) in 2014.

On Monday, newswire Dow Jones, citing a bank’s term sheet, reported that Felda is selling part of its 1.9% stake in Maybank to raise some US$64.1 million (RM285.89 million).

Shahrir said the mandate to sell the shares was given by Felda’s board of directors last November, before his appointment as chairman, with effect from Jan 1 in place of Tan Sri Isa Samad.

“In November, the board decided to review investments by Felda, including Maybank shares. Among the decisions was to dispose [of] Maybank shares that have been held for a long time, more than 10 years,” he said, adding that the disposal involved 35 million shares priced between RM8 and RM8.05 apiece.

Shahrir said the money raised from the disposal will not be used to fund Felda’s proposed acquisition of a 37% stake in PT Eagle High Plantation Tbk for US$505.4 million from Indonesia’s Rajawali Group.

“The funds raised from [the] Maybank share disposal will be utilised for various Felda settler programmes to fulfil Felda’s responsibility,” he said.

“We are also looking at various assets that we own. Some assets have appreciated. As an institutional investor, we have to emphasise good returns. Once an asset is not able to achieve reasonable returns, and with higher valuation, it is better to be disposed of,” he added.

Aside from financing Felda’s settler programmes, Shahrir said funds raised through the investment portfolio review will also use to recover “problematic assets” under FIC.

Last November, the Auditor-General’s Report revealed that Felda did not conduct feasibility studies and due diligence before venturing into three projects, namely Sturgeon Fish Farming, Savaro Restaurant and Schneeballen Pastries, which eventually led these projects to failure.

The report also mentioned that there was no approval from the rural and regional development minister and the finance minister for the establishment of the four subsidiary and sub-subsidiary companies for the implementation of the three projects.

Shahrir said Felda has no choice but to reorganise FIC, starting with a new set of directors.

“I have ordered the existing board to resign, and I will appoint new people. If you look at the AG’s (Auditor-General’s) Report, you can count how much money is involved in all those problematic investments. We have actually spent a lot of money with no returns,” he said, adding that the appointment of new FIC directors will be done by next week.

Shahrir also said the Malaysian Anti-Corruption Commission has begun investigating the FIC investments upon the release of the Auditor-General’s Report.

This article first appeared in The Edge Financial Daily, on Jan 18, 2017. Subscribe to The Edge Financial Daily here.