Leaked KPMG Due Dilligence Report on EHP Warns Against Purchase

This is interesting:

A leaked due diligence report prepared by KPMG for FGV revealed deep concerns regarding the value and sustainability of EHP and raises valid questions on the credibility of the seller in providing complete information to the Indonesia Government and Felda.

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EHP IN POOR FINANCIAL POSITION, ALMOST BANKRUPT

From a financial standpoint, EHP has financial liabilities/debts owing to banks of about USD843 million, of which USD127 million is due/has been due for repayment. Its cash in bank is also shockingly low at USD8.3 million as at March 2015, resulting in delayed payments to creditors and small business suppliers due to cash constraints. EHP claimed it was working on a new refinancing plan of USD281.3 million from various banks in Indonesia to cover its existing borrowing repayment obligation and operational expenditure. The question posed from the due diligence is has Felda ensured that Eagle High successfully refinanced its loans prior to Felda’s acquisition? The contravention of financial covenants by EHP on local banks loans would allow the creditors to foreclose.

Full story here: http://ipom.global/2017/06/13/leaked-kpmg-due-dilligence-report-on-ehp-warns-against-purchase/

The palm oil deal that worries the world, for other reasons

MALAYSIANS might be worried about the speculated deal between FELDA and two Indonesian tycoons, but environmentalists are also worried — and that could have other implications for Malaysia.

In March 2016, The Guardian newspaper reported the implications of the deal involving Felda Global Ventures and Indonesia’s Eagle High Plantations (EHP) owned by Indonesian Chinese businessman Peter Sondakh’s Rajawali Corporation.

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The report https://www.theguardian.com/sustainable-business/2016/mar/07/palm-oil-felda-eagle-high-multimillion-dollar-deal-human-rights-deforestation basically slams both companies, saying “The deal would bring together two laggards in the palm oil industry when it comes to their lack of commitments towards sustainable palm oil.”

Really, that’s what it says.

Felda is accused of human rights violations by the Wall Street Journal while Eagle High Plantations is accused of planting on disputed land including peat swamps. The accusations against Felda was never proven although environmentalists found “subtle forms of forced labour” in the plantations.

In effect, nothing good and even worse things come from combining the two palm oil giants. Is that something that the FELDA management wants to get into?

Are there no other reputable companies to link up with, even to restore the FGV management and ensure the rights, monies and assets of the smallholders are preserved in any new joint-venture?

The Guardian also gave reasons for the world to care about this potential deal.

First, this deal is at high risk of driving deforestation. If the acquisition goes ahead, Felda will acquire Eagle High’s large 425,000 ha land bank, of which an estimated 64% is undeveloped. This deal would put enormous pressure on Felda to show a return on investment, making it very likely that at least some of the undeveloped landbank would fall victim to Felda’s bulldozers.

The second major risk factor is human rights abuse. Given the abuses alleged by the Wall Street Journal, Felda should not be allowed to expand its plantation holdings until it can prove that it complies with international standards for the fair treatment of workers and respect for human rights.

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Felda’s investors should consider this deal a significant risk. Many of Felda’s and Eagle High’s customers have policies on no deforestation, no peat, and no exploitation, including Cargill, Golden Agri-Resources, and Wilmar. In the event that this deal results in land clearing and/or human rights abuses, these customers may drop their contracts with Felda/Eagle High, which would make the deal a potential economic disaster for the company.

A potential disaster for the company. For the shareholders who have no say over such deals. For the country which hosts a company that was founded from a noble venture 61 years ago and now face world condemnation.

CAN THE FELDA MANAGEMENT EXPLAIN THIS TO THE SMALLHOLDERS AND PEOPLE OF MALAYSIA? WHAT KIND OF DEAL AND WHO ARE WE DEALING WITH IN INDONESIA?

AND WHY THESE TWO INDONESIANS? CAN NO ONE ELSE MANAGE FGV OR FELDA PLANTATIONS?

After all, Malaysia is a country that pioneered rubber and then palm oil estates and plantations way before the Indonesians started on the sector. Malaysian companies ventured into Indonesia, so how are they better than us?

Are the managers in Sime Darby, TH Plantations, IOI, United Plantations, Kuala Lumpur Kepong, Boustead, Genting Plantations, Sarawak Oil Palms and TSH Resources so incompetent that FELDA has to resort to the help of Indonesian Chinese tycoons?

What do they have that Malaysian managers do not have? Money? Better access to markets?

Doesn’t any of this contradict a company that went for public listing as the world’s largest planter and five years later goes in need of new managers? What does it say about Malaysia?

PRIME MINISTER NAJIB RAZAK MUST PUT A STOP TO THIS DEAL!

IF THERE ARE ANY WEAKNESSES, THEN THE TOP PEOPLE IN FELDA MUST BE REMOVED AND PUNISHED.

NEW CAPABLE MANAGERS MUST BE FOUND AND WE ARE SURE THERE ARE MALAYSIANS WHO ARE UP TO THE CHALLENGE.

At the very least, FELDA should call for a request for proposal (RFP) as is being done by Bandar Malaysia. Get the best in the world to bid for stakes in FGV. Get the best of Malaysia to bid for the company.

ANY OTHER WAY STINKS TO HIGH HEAVEN. IS THERE A PLOT TO BENEFIT A FEW WITH THE INDONESIAN TYCOONS DEAL?

WALLAHU ALAM!

After Bandar Malaysia, FELDA lands in the hands of the Chinese?

WHAT has the Chinese have to do with FELDA? On the face of it, nothing.

The Federal Land Development Authority or FELDA is 61 this July. It was set up before Merdeka to resettle the rural poor into newly opened areas and organise smallholder farms.

In effect, the world’s largest and most successful collectivisation project, bigger and better than in any socialist countries. Malaysians, especially Malays, must thank Tun Abdul Razak Hussein for this.

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Since the 1990s however, FELDA has stopped opening up new lands, instead diversifying into other businesses.

It’s listed unit Felda Global Ventures is the world’s largest plantation company with 811,140 hectares of palm oil in Malaysia and across the world. FGV was listed in 2012 and touted as the world’s second biggest initial public offering (IPO) after Facebook.

FGV raised US$3.1 billion from the IPO and share prices peaked to RM5.46 on opening day, up 20 percent from the RM4.55 reference price per share.

Today, it is RM1.96 per share.

Not only that, FELDA is looking at a deal that will get back its plantation lands from FGV by selling a significant stake to two Indonesian businessmen who trade in oil palm and related assets but do not run plantations.

These two men are Indonesian Chinese tycoons – Wilmar International Ltd co-founder Martua Sitorus and Rajawali Corp boss Peter Sondakh. Wilmar is Asia’s largest agri-business group and oil trader based in Singapore.

Why are foreigners buying into what Malaysians, especially Malays, have been doing best over the years? How did the world’s second biggest IPO in 2012 now needs to be rescued and managed by outsiders?

Why are Indonesians coming in to own and run Malaysian plantations when it was Malaysians who first started these massive plantations and even invested in Indonesia? Are our people incapable? Most major oil palm producers are Malaysians, especially GLCs.

So why are we looking at Indonesia?

These two men might have Indonesian names but they are Chinese, and both have benefitted from a tax amnesty programme in Indonesia enabling them to keep their wealth without paying much tax.

ARE THESE THE KIND OF MEN WHO FELDA WANTS TO MANAGE FGV AND SMALLHOLDINGS?

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If Prime Minister Datuk Seri Najib Razak can ask Apa Lagi Cina Mau? in the 2013 general elections, can he also ask why is his government willing to deal with Chinese businessmen from abroad but not from Malaysia?

The May 1 to 7 edition of The Edge had details of the proposed deal.

The plan, according to the weekly’s report, would begin with Felda buying back its plantation land from FGV — which has already been mooted, according to sources — and will eventually detach Felda from FGV. Felda currently holds 33.67% in FGV, of which 21.25% is held directly and 12.42% through Felda Asset Holdings Co Sdn Bhd.

The report highlighted the land lease agreement (LLA) between FELDA and FGV, and noted that FGV will have to pay FELDA compensation for the loss of expected future profits in respect of the land, if the LLA were to be terminated.

Quoting sources, the weekly said the second part of the plan would result in the emergence of Indonesian businessmen Tan Sri Peter Sondakh, who controls PT Eagle High Plantations Tbk, and Martua Sitorus, the co-founder of Wilmar International Ltd, as new shareholders in FGV, via the injection of assets into the group in return for shares and management control.

CAN’T THE MALAYSIAN GOVERNMENT UNDER DATUK SERI NAJIB RAZAK ASK SUCCESSFUL MALAYSIAN COMPANIES SUCH AS SIME DARBY TO TAKE OVER FGV AND RUN THE PLANTATIONS?

We are talking about plantations here, not just oil palm trading. Why the need to get foreigners to run our plantation companies? Are there no Malaysians or Malaysian companies that can do this?

WHO WILL BENEFIT FROM THIS DEAL?

After all, the IPO was supposed to benefit everyone, especially the smallholders but their shares are now worthless pieces of paper. Will the new managers come up with a better plan or will Malaysia always see a new plan for FELDA settlers before every general elections.

REMEMBER, the FGV IPO was in 2012, a year before the 2013 elections.

This proposed deal is being floated now, a year before the next general elections.

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For the 2013 elections, Malaysia’s great saviours were supposed to be from the Middle East and the global markets. Will the Chinese now be our saviours in the next general elections.

WALLAHU ALAM!