Felda Global plans sweet IPO

This is written by my boss, Shahriman Johari.

KUALA LUMPUR: Felda Global Ventures Holdings Sdn Bhd, the commercial arm of the Federal Land Development Authority, plans to list some of its businesses starting with its sugar operations this year.

The initial public offering (IPO) of wholly-owned Malayan Sugar Manufacturing (MSM) may raise more than RM1 billion, sources said. This could also make it one of the biggest IPOs for the year. "Felda Global plans to list five companies and it is already in talks with a few investment banks," said one source.

Bankers expect CIMB and Maybank Investment Bank to be in the running to arrange these IPOs.

The IPOs will help Felda Global to fund its expansion. Although its financial numbers could not be obtained, the figures for its unit, Felda Holdings Bhd, give an idea of the group's immense size.

Felda Holdings' pre-tax profits have more than doubled to RM804.3 million in 2009 from 2005 while revenue has jumped by almost two-thirds to RM11.8 billion in the same period, according to its website.

Felda Global is the world's biggest tropical plantation group by land, producing mainly palm oil, followed by rubber and cocoa. It is also one of the country's biggest palm oil refiners and controls some 70 per cent of Malaysia's sugar market.

Although Felda Global's oil palm operations cover some 850,000ha, it only manages them for the settlers and the Felda Authority. It now wants to expand by leasing land abroad like Indonesia and probably as far as Africa, where oil palm trees originally came from.

Sources said Felda Global now has a five-year plan and is even thinking about the next 50 years. Its most immediate concern is to improve productivity in its current operations and subsequently, raise funds for further expansion.

Felda Global bought MSM from Robert Kuok's PPB Group Bhd in 2009 for RM1.2 billion cash. It also bought half of Kilang Gula Felda Perlis Sdn Bhd for RM26 million and some 6,000ha of land in Chuping in Perlis for RM45 million.

For MSM, its IPO will help it grow its upstream business and eventually, its downstream business abroad. In Malaysia, the price of sugar is subsidised, which means it needs to look into other markets to grow. Sugar is priced at RM2.40 per kg versus RM3.50 in Indonesia, RM3.80 in Singapore and RM2.80 in Thailand.

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