Malaysian palm oil giant, FGV Holdings (FGV) is looking to sell its plantation assets in Indonesia to improve its financial position. According to a Bloomberg article on 23 April, FGV and Lembaga Tabung Haji (TH) are both working together with an adviser to gauge potential buyer interest in Trurich Resources.
Trurich, a 50:50 FGV-TH joint venture The Star article (23 April) wrote that people with knowledge of this matter said that both FGV and TH may seek to value Trurich at USD1bil. including debt. Trurich is a company based in Kuala Lumpur which operates as a subsidiary of FGV. Trurich is a 50:50 joint-venture company of both the pilgrim fund and FGV and this company owns and manages 42,000 hectares of oil palm plantations in East and Central Kalimantan.
Last year, TH planned to take over FGV’s entire stake in Trurich in a deal that could be worth several hundred million ringgit. The source said the proposal for the Trurich stake purchase was submitted to the board prior to the 14th General Election, but the final decision would require the signature of the minister in charge of TH. However, the decision was uncertain following the Barisan Nasional’s historic defeat during the election (Malaysian Reserve, 13 Jul 2018).
In the same article, it also mentioned that FGV’s 2017 annual report highlighted that Trurich’s liabilities at the end of the financial year of 2017 stood at RM214.2mil and the company posted a net loss of R97.5mil.
Deal that could rescue FGV revive its fund’s balance sheet Since the 14th General Election in May 2018, the Prime Minister Tun Mahathir Mohamad has pledged to improve transparency at Malaysia’s government-linked firms and apply more scrutiny to their business dealings as part of an anti-corruption drive (Bloomberg, 23 April).
The deal would help Trurich’s owners offload assets that have been the subject of contention and it will also help FGV to revive the fund’s balance sheet by offloading equity investments with significant unrealized losses.
However, FGV and TH haven’t made their final decision whether to sell and they may decide to keep the assets if they cannot get buyers at an attractive price (The Star, 23 April).
Source: Macquarie Research - 24 Apr 2019
https://klse.i3investor.com/blogs/kltrader/203732.jsp
