Felda buys FGV shares in bid to bolster prices
The Federal Land Development Agency (Felda) has been purchasing Felda Global Venture stocks from the open market in an apparent bid to shore up share prices.
According to announcements made to Bursa Malaysia, Felda acquired a significant 29 million shares in December alone through subsidiary Felda Asset Holdings Company. This is more than a third of the total trading volume of 83.81 million shares for that month.
Felda's acquisition run appeared to have begun in October, when it had bought 711,100 shares. This grew exponentially in November, where it snapped up 8.43 million shares from the open market.
The acquisitions bumped up its indirect interests to 18.04 per cent from 17 percent previously. This is on top of its 20 percent direct interest.
Conversely, the Employees Provident Fund (EPF) had sold off 18.6 million of its shares in December, most disposed of after the lock-in period for cornerstone investors expired at the end of last month.
EPF, which was accused by PKR de facto leader Anwar Ibrahim (right) of driving up FGV prices, had in fact purchased a relatively more modest 3.86 million shares in the same month. It purchased 12.45 million shares in October and November.
Also dumping a large amount of shares in December was the Retirement Fund Incorporated (KWAP), which sold off 597,900.
FGV has been on a slippery slide down since July 2012, once falling under its initial public offering price of RM4.55. It closed yesterday at RM4.60.
However, CIMB senior analyst Ivy Ng, who is neutral on FGV, believes that Felda's move to buy up FGV shares is "nothing unusual" and a legitimate move for FGV's top shareholder.
"IOI's major shareholders are also buying up their own shares so I don't think we can read more into it," she said when contacted.
"Typically it would be because the shareholder sees value in the company."
She added that although Felda is bucking the trend by purchasing FGV shares, its reasoning may differ from others shareholders who may be looking to exit while the price is still above IPO for quick profits.
"Some investors may have also been locked in before so we see some selling in December."
Further slump expected
Alliance Research's Arhnue Tan, who has a sell call on the stock, believes that Felda is likely buying the shares to send a signal to the market.
"They could be doing this to instill investor confidence for the share," she said, adding that the share is likely to flatten out in the coming weeks.
"Compared to other plantation counters which have similar portfolios, like the IOI Group and Kuala Lumpur Kepong Bhd, FGV seems to be in a transition stage with their replanting while their earnings are not that good."
She said the "peculiar" profit distribution within FGV also makes it less desirable compared with the other plantation counters.
The average target price by analysts is RM4.19.
FGV was contacted for comment but had yet to reply at press time.
AIDILA RAZAK is a reporter for Kinibiz.com, a business news portal which will be launched next month.