Saturday, 10 December 2016

FGV: mixing politics with business

Article in The Star: "A roller coaster ride in store for FGV"

Some snippets:

The simple kampong folks who had relied on the value of these shares as their retirement income are now wondering what is in store for them now.

This applies to all shareholders of all companies, there is an issue of being properly informed about the possible risks of investing in listed companies, being warned that shares can go up but also down, about not putting all your eggs in one basket. And I don't mean hiding the risks somewhere on page 232 of a listing prospectus 500 pages thick. The media also has a role to play in this.

The reality is that FGV has been the undisputed worst plantation stock performer ever since its initial public offering (IPO) in July 2012. The share price decline was so bad that the company was removed from the Bursa Malaysia KLSE Index stocks last year.

Since its hyped-up listing at RM4.45 per share, the battered government-linked stock closed at RM1.67 yesterday representing a whopping 62.5% decline in share prices.

Many IPOs are very much hyphed these days and disappoint after being listed. The authorities might want to look into this issue. It (partially) explains the disappointing performance of the Bursa market.

It has serious political implications as the country heads towards a general election, speculated to be held next year.

The small holders are loyal supporters of the Barisan Nasional and their interests deserves [sic] to be protected.

FGV is regarded as a government “protected” stock and rightly so too.

Is the writer of this article (Wong Chun Wai) proposing a new sort of Corporate Governance, one whereby shareholders of listed companies who are loyal supporters of the ruling political party get some sort of special protection and others not?

An "interesting" proposal, but one which can not get any support whatsoever from this blog.

The Star itself is a listed company and majority owned by a political party, may be that explains the writer's thoughts though.

In my opinion, most of the problems of FGV are caused (not solved) by political connections, so the solution is rather simple: cut all ties between politics and business. Let professional managers  run companies (like FGV) without any political interference whatsoever. Cut the dead wood, base decisions on mergers and acqusitions on proper commercial terms, etc.

In the short run there might be some pain in certain quarters, in the long run there will be many gains for all.


  1. The solution is to join venture with the best managed plantation companies in the world. Let these companies manage FGV's plantations. Pride and politics will have to take a back seat.

  2. that's why I don't invest in glc with politicians on the board believe me they are not there for the good of the company

  3. Agreed. Politic or self interest have to be taken aside. The CEO will have a tough time to tweak n change the corporate culture.

    Perhaps the Turkish fraud is just a tip of the iceberg. Needless to say, FGV has destroyed shareholders value.