Analysts question FGV's Tradewinds disposal price

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The decision of Felda Global Ventures 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, which according to analysts should be higher.

While Tradewinds has not been valued highly on the market, the private transactions of assets similar to those held by Tradewides, which is owned by tycoon Syed Mokhtar al-Bukhary, tell a different story.

For example, analysts said that Tradewinds' 73 percent-controlled subsidiary Tradewinds Plantations alone owns more than 150,000 hectares of land.

"Plantation land in Malaysia transacts as high as RM20,000 a hectare," an analyst familiar with the plantation sector noted.

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

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

According to a circular to shareholders from independent stockbroking adviser M&A Security, Tradewinds' fair value price is between RM9.60 and RM11.10 a unit. 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 FGV may not have had much leverage to push for a higher price, considering Syed Mokhtar's "strong influence".

"The deal would 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," the analyst said.

A Public Investment Bank Bhd analyst added that despite holding a third of the shares on offer, FGV's stake was too small to truly corner Tradewinds into doing 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.

All the same, the analysts agreed 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 as a strategic one. And it has made those financial gains," the plantations analyst said.

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

No special dividend

The analyst said that with no special dividend for shareholders on the cards, the RM550 million raised would go straight into the FGV cash pile.

"Even if there was a dividend, it would only have been 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 added, FGV would need to put its growing cash pile to good use soon.

FGV has not responded to questions from KiniBiz .



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