FGV undertaking forensic audit investigations on past investments

Exercise to be concluded within the next two months

KUALA LUMPUR: Felda Global Ventures Holdings Bhd (FGV), which has obtained approval to change its name to FGV Holdings Bhd, is undertaking independent forensic audit investigations into its past investments, which are likely to be concluded within the next two months.

One of the ongoing investigations is the group’s investment in London-listed Asian Plantations Ltd (APL), which is currently being conducted by a legal firm in London, particularly on the valuation of the land, said FGV chairman Datuk Wira Azhar Abdul Hamid ( pic) after its AGM and EGM.

“We don’t want to just look at this from an accounting perspective. We also need to look at it from a legal perspective.

“The group is using domestic and international resources to undertake the forensic investigations on APL,” he added.

Over the past three years, FGV has done a series of major acquisitions which include APL and Pontian United Plantations Bhd for a combined RM1.82bil. However, he denied that the group was undertaking investigations into Pontian United Plantations.

Azhar discovered that some areas of APL’s plantation could not be used for planting oil palm after personally visiting the plantation, adding that there is hearsay information that the land also did not belong to APL, highlighting a serious concern.

“This is a serious matter, but we cannot accuse as the investigations are still ongoing. We have to be thorough in our verification. We paid around RM1.1bil for investments in APL,” he noted.

APL owns 24,622ha of oil palm plantations through its five wholly owned estates in Sarawak.

Azhar said the independent investigation would also verify if the group’s employees are the culprits of the resulted situation related to APL.

“We don’t know whether we have a criminal case but certainly we are looking for a civil case, as we have to wait till we conclude the findings of the investigation. If there are clear and good reasons to file a police report, we will,” he noted.

After the purchase of APL in 2014, FGV’s former group president and chief executive officer Datuk Mohd Emir Mavani Abdullah said APL represented a fairly priced and value-added deal, with an enterprise value of RM62,358 per planted hectare. FGV also initiated legal action against a subsidiary’s client – Dubai-based Safitex Trading LLC – to claim back around US$11mil owed, according to Azhar.

Apart from this, the group is concerned about Pakatan Harapan’s pledge to increase the minimum wage to RM1,500, as it would have a significant impact on its cost of production to an estimated figure of RM165mil a year.

Currently, FGV’s foreign workers earn an average salary of RM1,300 apart from the group providing housing, insurance and the levy for foreign workers.

The minimum wage in Peninsular Malaysia is currently RM1,000 while in East Malaysia, it is RM920.

“For every RM100 increase in salary, it will cost the group RM33mil per year. Don’t get me wrong, but foreign workers are not cheap. With our wages to workers now, we are almost paying the minimum wage they are targeting,” Azhar added.

He said the group was pressured about the earnings for the second half of the year due to lower crude palm oil prices and forex exchange rates, adding that its challenge is the cost of the replanting exercise for its old palm trees to improve productivity. FGV is on track to replant 15,000ha this year.

Meanwhile, a resolution to re-elect a representative from the Federal Land Development Authority (Felda) as a director has been withdrawn after FGV’s AGM.

“It has been a very unique situation and it’s the first time in my life where I couldn’t’ get a resolution to be seconded. So, I had to take the advice to withdraw the resolution.

“In this situation, we couldn’t get a seconder, so we could sense the sentiment. The resolution relates to a representative from Felda,” he added.

According to FGV’s filing with Bursa Malaysia, the Felda representative who had failed to be re-elected as a director was non-independent, non-executive director Datuk Seri Abu Bakar Harun, who is also the chairman of the Pahang State Felda Affairs Committee. He is also the deputy chief of the Pekan Umno division.

However, one of the resolutions approved by the shareholders was the change in the group’s name to avoid confusion between Felda and FGV.

“FGV is purely a commercial-listed entity. We are not the same entity. If there is negative news about Felda, our share price takes a hit. We want to protect our shareholders,” he stressed.

Felda has a 33.67% equity interest in FGV. Asked on the speculation of a takeover of FGV, Azhar clarified that “there has been no proposals put forward, people are just talking. I wonder where this speculation is coming from. But FGV is looking at opportunities to enhance value”.