28 June 2012
Jun 28: Investors have been warned not to be ecstatic amid news that Felda Global Venture Holding has made an impressive debut as widely reported this morning.
“Profit taking has already started. It doesn’t matter where you begin but where you end,” said PAS Research Centre director Dr Dzulkefly Ahmad (right).
“Who will ultimately be the cornerstone shareholders in the long haul?” he asked.
Felda Global Venture Holding made its debut today at RM5.41, 20 percent higher than its initial public offering price.
The stock hit a high of RM5.46 in the morning before retreating to RM5.25 at 12.00 noon.
This is despite a disappointing 50 percent drop in its first quarter revenue and downtrend in local bourse, which financial daily Wall Street Journal had earlier described as a nasty surprise for investors ahead of FGVH’s debut in Bursa Malaysia.
“Nasty surprises like this won’t do much to help rekindle investor enthusiasm for IPOs. Nor are investors likely to stick long with Felda if its prospects can wither so quickly,” the paper said.
WSJ said the slip was contradictory to the FGVH’s claim in the prospectus about its expertise as the world’s third-largest palm-oil plantation operator.
“The offering’s underwriters also talked up demand, citing a 4.2 percent rise this year in global consumption of edible oil and fats, one of palm oil’s main uses. But that hasn’t meant much for Felda so far. First-quarter revenue barely budged, rising just 1.8 percent from last year,” it added.
Dzulkefly said the WSJ report echoed his earlier prediction that institutional investors would not stay with FGVH for long term.
“Especially when the information about more than 50 percent of Felda’s crops which need to be replanted due to aging as well as its huge cost,” he added.
He said Felda had given poor excuses over its first quarter performance by blaming higher-than-expected price for crude palm oil.
FGVH is expected to raise RM9.93 billion (US$3.12 billion) from the IPO, which has been heavily oversubscribed.
However, many predicted that FGVH would fall into the same predicament like Facebook, which now faces a string of lawsuits from investors over undisclosed financial information prior to the listing.
“Following early stage of profit taking after the IPO, I am worried about the pending scenario more likened to what befell Facebook,” said Dzulkefly, who added that international investors would soon learn about the “controversies surrounding the appointment of its chairman [Isa Samad], the tribunal, the cross-firing accusations and all sorts of bitterness in this FGVH IPO”