22.10.2018 (The Star Online) - KUALA LUMPUR: Felcra Bhd will start with a clean slate under the stewardship of its new chairman, Datuk Mohamad Nageeb Ahmad Abdul Wahab.

Nageeb, who is finalising his new top management team and board of directors, also plans to undertake a full management audit on Felcra Group and its subsidiaries, slated for completion by year-end.

This will be followed by a rationalisation and restructuring of Felcra’s diversified business operations.

Felcra, which was corporatised in 1997, is involved in oil palm, rubber, paddy, fertiliser, property, livestock and agrifood-related businesses.

The government-linked company (GLC) is wholly-owned by the Ministry of Finance Incorporated (MoF Inc.)

The victory of Pakatan Harapan in the 14th General Election in May saw the mass resignations of top CEOs and directors of the GLCs, including from Felcra, who were politically-appointed by the previous government. 

“I have a big task now as I am taking over an organisation in challenging times,” Nageeb told StarBiz in a recent interview.

He said Felcra plans to submit new proposals that will help position the GLC on a stronger footing in future to the MoF Inc and its board members.

“The new Felcra must have the ability to balance between the right profitable businesses and its social obligation to provide good returns to 111,684 Felcra settlers and their families,” he added.

Given the rising cost and weak crude palm oil (CPO) prices, Nageeb pointed out that Felcra was facing difficulties to fund its  operations, particularly for new replanting while having to consistently provide the returns to its settlers.

In total, Felcra managed 220,086 ha of its settlers’ estates, which were planted with oil palm, rubber and paddy while the group also has its own plantation land at 30,189 ha.

The combined oil palm estates under Felcra is 209,249 ha, which accounted for an equal percentage of mature trees and immature trees. 

Felcra charges a minimal fee of 6.5% to settlers as management fees, which has not changed since its inception.

Despite working on a tight cash flow, Nageeb said Felcra also has to provide settlers with incentives in the form of “Wang Sara Hidup” for their living cost during the replanting gestation period. 

Moving forward, Felcra is targeting to expand its oil palm plantations from 30,000 ha to a more “sizeable” plantation hectarage for better economies of scale.

Since 1997 Felcra has been self-sufficient with “zero” allocations from the government.

Instead, the Government via MoF Inc provided loan with a 4% interest to Felcra as development cost for replanting at the estates of settlers’ withpalm trees with average age profile of 15 years old.

For the past few years, the loan granted for Felcra’s replanting programme has been much lower than its spending expenses, explained Nageeb.

“The differential had to be taken by our internal funds, which has been depleting drastically.”

Therefore, Felcra will need to find new source of funding as “the Government loan and our depleting internal funds are insufficient to support group’s operation,” said Nageeb.

One option for Felcra is to capitalise on government loans.

“As Felcra has zero borrowings, it will be easy to obtain borrowings from commercial banks, but we will need the Government to help subsidise the loan interest for us,” he added.

Other plans include a kitchen sinking exercise targetted at Felca’s non-core subsidiaries, which were   unprofitable, while Felcra mulls on monetising its assets.

Currently, Felcra has 32 active subsidiaries in operation.

“Felcra has too many subsidiaries that are bleeding us. We may be disposing our non-core businesses for better operational efficiency. Some subsidiaries, which have overlapping functions, will need to be merged as well,” said Nageeb.

“If possible, I want all non-profitable businesses to be gone by next year, which may include our football team, Felcra FC team, which we spend about RM8mil on a year!”, stressed Nageeb.

“However, in the event that Felcra FC is able to get full external sponsorship, we will then review this decision,” he added.

Assets disposal

Felcra is also looking at selling off its Semarak mixed-development project in Jalan Semarak, KL, which comprised of “Wisma Felcra” tower block and service apartments, with a gross development value of RM1.09bil.

“We are in negotiations with several parties to dispose this property,” said Nageeb.

Following the changes in the contract with the project developer, WZR Property Sdn Bhd, he said Felcra does not want to take up the liability and to bear for the entire construction cost of the development.

Initially, Felcra was just the land owner, while the developer was obligated to fund for the full cost of the project.

“However, the changes in the contract made Felcra liable and must bear the construction cost, resulting the group having to fork out nearly RM200mil so far from its internal funds.”

Despite ongoing negotiations to sell the Semarak project, Nageeb gave his assurance that the project will be able to meet with its timeline for completion by end-2019. Currently, it is 50% completed.

In property, he said Felcra plans to focus on developing more affordable housing in the rural areas for its settlers and their families.

On the proposed listing of Felcra by the previous management, Nageeb said: “The way I look at it ... this will not happen in the next 36 months. Therefore, I will put it on the back burner.” He said the perception on the listing of GLCs are poor, especially after the debut of Felda Global Ventures Holdings Bhd

image: https://cdn.thestar.com.my/Themes/img/chart.png

 on Bursa Malaysia. “There is a strong perception that if Felcra were to go for a listing, then it will become another FGV,” said Nageeb, who added that Felcra will need to build up trust from the investment community prior to its initial public offering exercise.

Read more at https://www.thestar.com.my/business/business-news/2018/10/22/a-new-dawn-at-felcra/#P6RWUL8AXP8JXZqx.99