FGV shares plunge to record low since IPO

By ALIFAH ZAINUDDIN 

FGV Holdings Bhd’s share price plummeted to a record low yesterday, erasing RM12.63 billion in market value since it became a public company in 2012 and leaving the government-owned planter in tatters.

News of the legal actions against 14 of the company’s former management and board members sent shivers through the equity market and investors dumped FGV’s shares, pushing the price to its lowest level of RM1.07 before recovering slightly to close at RM1.09.

Yesterday’s drubbing saw the world’s second-largest initial public offering (IPO) in 2012 after Facebook Inc plunging to a market value of just RM3.97 billion compared to about RM16.6 billion when it went public.

When the stock was initially traded then, its share price rushed to as high as RM5.46 or a 20% increase compared to the IPO reference price of RM4.55, making it one of the darlings of the investing community.

Accusations of corruption, questionable corporate dealings, weak earnings and multiple changes in management in recent quarters have dented investor confidence.

Many initial investors in the plantation giant were institutions and some had substantially pared down their exposure to cut their losses.

The lowest FGV’s share price had dropped was RM1.21 in November 2015, largely due to weak palm oil prices.

An analyst told The Malaysian Reserve that FGV’s share price could go below the RM1 mark if crude palm oil (CPO) prices continue to slide.

“If it drops below RM1, then I guess there will be rumours of a privatisation or a corporate exercise in the offing. It would make sense for them to privatise it and move away from the public eye,” said a market analyst.

CPO prices have dropped to a three-year low to below the RM2,000 level, dragging the whole industry down.

FGV’s new board and management team are trying to revive the ailing government-owned company including scrutinising questionable past dealings. One of the deals which is under scrutiny is the purported inflated purchase price of loss-making Asian Plantations Ltd (APL).

Former group president and CEO Datuk Mohd Emir Mavani Abdullah and former chairman Tan Sri Mohd Isa Abdul Samad are among the 14 being named in a civil suit over the 2014 transaction.

The analyst said FGV’s share price could bounce back as seen in the trading of MyEG Services Bhd.

Shares of the IT services company hit limit-down at RM1.13 on Oct 19, effectively erasing some RM1.31 billion of its market capitalisation.

The stock recovered to a two-week high of RM1.35 on Nov 5, but has since resumed a downward decline in the past month. It closed 0.89% or one sen lower yesterday at RM1.11.

“FGV could bounce back. Everyone knows how bad the state of the company is. I think it has been priced in, so you can say it is already sitting at the bottom. The downside is limited,” the analyst said.

The legal proceedings against its former board members came about after the conclusion of a forensic investigation into the acquisition of APL, which is one of six internal investigations undertaken by the company.

FGV is seeking relief against the defendants for damages totalling RM514 million for losses from the acquisition of APL or alternatively, damages for losses from the acquisition to be assessed by the court.

It is also seeking relief for interest at the rate of 5% per annum on damages and amount of costs awarded, starting from the date of the filing of the suit until the date of full and final settlement.

Kenanga Research, in a note, said it is neutral on the news as legal proceedings have just commenced and the final outcome is yet to be determined.

“However, we will follow this development closely, but the timeline of the final outcome is still uncertain. Channel checks with management suggest that there is no impact on existing operations, while the group is still assessing the financial impact on the company arising from this litigation and would make a further announcement when there is a material update.

“Our current recommendation is ‘Market Perform’ and a target price of RM1.46; which we will review pending its upcoming