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Tuesday, 21 March 2017 | MYT 12:00 AM

Three Chinese companies eye strategic stakes in FGV

PETALING JAYA: Three China-based companies including China National Cereals, Oils and Foodstuffs Corp (COFCO) are vying for strategic stakes in Felda Global Ventures Holdings Bhd (FGV).

A source close to FGV told StarBiz that: “These Chinese companies are major global consumers of palm oil/palm products and are looking to raise stakes in FGV via the open market.”

This is reflected in the FGV share price which was actively traded since early trade yesterday. It went from a low of RM1.93 to a high of RM2.18 before closing 18 sen or 9.42% higher at RM2.09.

FGV is the world’s largest crude palm oil (CPO) producer with a market capitalisation of about RM7.62bil.

Its major shareholders are Felda Land Development Authority (Felda) which holds 32.4%, Lembaga Tabung Haji 7.9% and Kumpulan Wang Persaraan (Diperbadankan) (KWAP) 7.2%.

The source however denied recent report that FGV is in talks with a company linked to business tycoon Tan Sri Syed Mokhtar Al Bukhary. But he added that “FGV is well aware of the interest by COFCO and two other Chinese parties which are keen to come on board as FGV strategic investors.”

PublicInvest Research (PIVB) said in its latest report that the entry of COFCO could potentially boost FGV’s venture into the republic’s downstream market given the former’s status as China’s largest food processing, manufacturer and trader.

COFCO has controlling interests in 11 listed companies in Hong Kong and four public listed companies in main land China.

COFCO is involved in wide ranging industries such as Fortune edible oil, Great Wall wine, Mengniu Dairy, Lohas fruit and vegetable juice, Le Conte chocolates, Tunhe tomato based products, Joycome meat products, Joycity Shopping Mall, Yalong Bay resorts, Gloria Hotels, Snow-Lotus cashmere, Zhongca tea products, COFCO Trust and COFCO-Aviva Life Insurance.

COFCO group is also ranked number 121 in Fortune Global 500 and the top in total assets and third in total revenue in the world agriculture industry.

However, PIVB warned that COFCO’s strategic investment in Malaysia might experienced stumbling blocks in the form of the tightening of capital controls by China’s central bank.

When contacted, FGV group president and chief executive officer Datuk Zakaria Arshad(insetpic) declined to comment on the latest development.

But he said FGV as a growing business entity would always be on the lookout for opportunities to expand its highly diversified global oil palm business.

“Towards this, China, India, Pakistan, Middle East and the North African countries have been earmarked as lucrative destination markets for our downstream palm oil products.”

Currently, about 70% of FGV’s revenue is generated from the upstream business.

To further improve the group’s bottom line in the downstream segment, Zakaria said FGV would intensify efforts to develop destination and consumers market either through organic expansion marketing agents or “strategic partnership” with the local players there.

“China is an important destination markets for FGV’s downstream palm oil and palm olein products,” he added.

Zakaria said a holistic review of joint-venture terms with key strategic partners was being performed to fully realise the “win-win” partnership aspirations.

Selection criteria for future strategic partners have also been tightened so that the “win-win” mechanisms are established and addressed as the partnership agreement was sealed.

Zakaria has envisaged FGV to perform better this year given anticipation of higher CPO production – returning to 3 million tonnes level – compared with 2.6 million tonnes last year.

In 2016, FGV reported its lowest full-year net profit since its initial public offering in 2012 on account of several rationalisation costs and one-off recognitions made during the final quarter.

These recognitions dragged down FGV’s overall net profit for the financial year ended Dec 31, 2016 to RM29.61mil compared with RM188.79mil a year ago. Its full-year revenue amounted to RM17.28bil, a considerable improvement from RM15.55bil in FY15.

The group reported a lower year-on-year net profit for the fourth quarter 2016, which was a period of strong gains in the price of CPO.