Wednesday, September 12, 2012

EPF Buys More as FGVH Shares Drift

When FGVH got listed, its shares climbed 20 percent on the first day of trading to RM5.46 but have been in a general downward trajectory since. Shares of the plantation giant sank to a new low on Monday, closing at RM4.68 a share or just 13 sen above its issuing price – see above – well, at least that was what I thought.

Well, well, well! Yesterday, shares of FGVH set an even newer record when it plunged eleven sen from its opening price to a low of RM4.57 before rebounding to RM4.73 at the end of the trading day and barely missed going under its IPO’s institutional selling price of RM4.55.

But the Employees Provident Fund (EPF) didn’t bat an eyelid and instead went on a buying spree. This cornerstone investor is reckless because it has been raising its direct stake in FGVH from 5.07 percent on July 04 to 7.02 percent yesterday! Even as the clouds darkened and an air of gloom and doom hung like heavy theater curtains, heroic EPF snapped up another 2.2 million shares of FGVH.

The accumulation of FGVH shares despite its plunging performance over the past two months is giving many market observers the impression that the country’s largest pension fund could be trying to prop up shares of the plantation group. This is bad news for all EPF contributors because all our savings are in there!

To make matters worse, a catalog of woes has emerged. It seems that FGVH is struggling with ageing oil palm trees that account for 53 percent of the 320,000 hectares of oil palm estates – FYI, this rank among the highest in the industry. Therefore, if it decides to embark on a replanting exercise, this would mean even more loss of income for FGVH during the period it takes for trees to mature. It also reportedly suffers from depressed productivity in terms of tonnes per hectare that ranks as the third lowest among the major Malaysian plantations firms.

Generally, the Malaysian palm oil industry has been under strain from low prices, which have declined more than eight percent this year. And stock piles of the commodity are mounting.

I worry for those Malaysians contributing to the EPF!

Yesterday, I was at the Taman Indrahana Toastmasters meeting where I was the evaluator for Alice Ong, the club’s representative for the upcoming Area B2 Humorous Speech contest on September 22, 2012. She delivered humor well and I hope she wins and proceeds to the next round. The other good speech I heard yesterday was from Angeline Loo. Overall, I would give this meeting a 7.5 out of a 10.

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