Corporate  |  FEBRUARY 6, 2013 8:43AM

Analysts question FGV’s Tradewinds disposal price

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Felda Global Ventures’ decision to sell its 20 percent stake in listed Tradewinds (M) Bhd for RM9.30 per share does not reflect the true value of the stake, analysts say.

The analysts say that while the Tradewinds has not been valued highly on the market, private transactions of assets similar to those held by the company owned by tycoon Syed Mokhtar al-Bukhary tell a different story.

For example, they said, Tradewind’s 73 percent-controlled subsidiary Tradewinds Plantations alone owns more than 150,000 ha of land.

“Plantation land in Malaysia is transacting at as high as RM20,000 per ha,” an analyst familiar with the plantation sector observed.

Tradewinds also owns a majority stake in Padiberas Nasional Bhd (Bernas) and sugar assets.

FGV last week accepted the offer to sell its stake in Tradewinds for RM9.30, or RM550 million. This was, however, at least 30 sen lower a share than independent valuations.

According to independent advisor M&A Security’s circular to shareholders, Tradewinds’ fair value price is between RM9.60 to RM11.10. At these prices, FGV could have earned RM569 million to RM658 million, or up to RM108 million more.

Further, FGV’s 20 percent stake is crucial to Tradewinds’ privatisation plans, and could have  worked in FGV’s favour.

‘Tycoon’s clout’

However, another analyst with a local bank said that FGV may not have had much room to push for a higher price considering Syed Mokhtar’s strong “influence”.

“The deal would have have had some amount of support from various parties (outside of FGV)…I don’t think they (FGV) could have done very much.

“Some sort of agreement is likely to have already been in place,” she said.

A Public Investment Bank Bhd analyst, added that  despite holding a third of the offer shares,  FGV’s stake is too small to  truly  corner Tradewinds into doings its bidding.

“If they refuse to sell because of the price,  (Syed  Mokhtar) could just buy up the rest of the company and leave the 20 percent to them and that will not be  in FGV’s interest either,” he said.

‘Not much to complain about’

All the same, the analysts agree that at a 165 percent return on investment, FGV “does not have much to complain about”.

“(FGV) purchased the shares three years ago  as a financial  investment, not a strategic one.  And they have made those financial gains,” the plantations analyst said.

FGV purchased its Tradewinds from Greenfell Holdings, a PPB Group related company, at only RM3.50.

The analyst said that with no special dividend  for shareholders on the cards, the RM550 million raised will go straight to their cash pile.

“Even if there was a dividend, it would only be around 15 sen per share. As it is FGV  has a policy of paying out half of its earnings in dividends, which is already substantial.

“The interest earned from cash made from the Tradewinds sale will not be able to offset the loss to earnings from the disposal of the stake,” the investment banker said.

As such, she said, FGV will need to soon put its growing cash pile to good use soon.

FGV has not responded to questions.


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