Spotlight on listed entities
Khairul Khalid 
Iris, Encorp and FGV may be sold off as an option to financially prop up Felda

THE ongoing restructuring of the Federal Land Development Authority  (Felda) has come under close scrutiny, especially with the faltering fortunes of its three listed entities that it heavily invested in.

Its listed plantation arm Federal Global Ventures Holdings Bhd (FGV) has been hogging most of the spotlight due to its high-profile management upheaval.

But its other two prominent investments in non-plantation businesses – Iris Corporation Bhd and Encorp Bhd are also undergoing major changes.

FGV saw the appointment of an acting chairman and officer-in-charge while Iris had a new chairman and deputy executive chairman. Encorp too appointed a new chairman.

An analyst tells FocusM that the uncertainties in the companies are of significant public interest and will affect investor sentiment.

“Felda is at a crossroads. There are already question marks over how it will fund its operations.

“Instead of being held up as Felda success stories, the three companies [FGV, Iris, and Encorp] have been criticised as symbols of its failures.

Malaysian Investors’ Association president Datin Ho Choy Meng feels the three listed companies could be victims by association due to problems affecting their parent company.

“These companies aren’t really under my radar, but FGV, Iris and Encorp aren’t favourites of investors, perhaps because of the baggage of their association with Felda.

“It is a difficult call for minority shareholders. Should they hold or sell? If they hold, the prices might not recover or even fall further.

“If they sell, they will suffer instant losses,” she says

All three have seen their share price slide under Felda’s control. Since Felda listed FGV in 2012, its shares slid from the IPO price of RM4.55 to RM1.59 on Sept 7.

Likewise, it took control of Encorp in 2014 for RM317.5 mil or RM1.55 per share but the shares are now trading at 78 sen.

As for Iris, it acquired the controlling stake in 2013 for RM148 mil or 28 sen per share. It is now trading at 19 sen.

Asset disposal

Some analysts speculate that Felda will eventually dispose its listed companies to get much-needed cash.

Felda controls 33.67% of FGV, 70.8% of Encorp and 19.4% of Iris. At today’s prices, it will be able to obtain around RM2.17 bil for its stakes.

It will incur a loss of RM225 mil if it disposes both Encorp and Iris. Felda also has significant stakes in other listed companies such as Barakah Offshore Petroleum Bhd with 8.9% stake.

“Felda will definitely incur huge losses if it disposes these assets under current market conditions. It won’t be a win-win situation, for either Felda or its shareholders,” says the analyst.

Felda’s plantation earnings via FGV has been topsy-turvy, to say the least.

One reason it bought into companies like Iris and Encorp was to diversify its revenue stream and reduce its dependency on plantations. But it has not been as successful as it hoped.

“The public will also be concerned as to how much of taxpayers’ money will have to be used to cover shortfalls in expected revenue from these investments.

“It will also need to re-evaluate whether FGV should continue as a listed company,” he says.


The analyst says there are two options for Felda.

“It can put the companies back on track with a strong management and board of directors. But even then, it’s far from a sure thing due to Felda’s political nature.

“That is the root of the problem. The businesses are run by politicians. Alternatively, Felda can cut its losses by selling them.”

Felda chairman Tan Sri Shahrir Abdul Samad indicated that it needs between RM2 bil and RM3 bil annually to carry out its programmes for settlers.

 Shahrir embarked on restructuring Felda after his appointment as chairman in January

Since taking over the top post last January, he embarked on a major shake-up of Felda, including re-evaluating non-core businesses, especially those under the portfolio of its investment arm Felda Investment Corp (FIC).

There were rumours a couple of months back that FGV might be taken private, but Shahrir denied them.

The rumours have nonetheless persisted, especially given FGV’s well-documented woes.

Felda’s journey began when it was given 850,000ha of oil palm estates by the state governments under the Land Settlement Act 1960, of which 479,765ha went to smallholders.

The remaining 355,000ha were managed by its former subsidiary, Felda Holdings Bhd (FHB), and were injected into FGV on a 99-year lease when the latter went public in 2012.

But it will not be an easy task to sell the assets.

FGV was supposed to be the jewel in Felda’s crown when it was listed on Bursa Malaysia in what was then trumpeted as the world’s second largest initial public offering (IPO) after social media giant Facebook.

Since its listing, FGV’s shares have fallen 65% from the IPO price of RM4.55.

FGV was incorporated in 2007, and prior to that, it was Felda's commercial arm. Its 2012 listing raised RM10.5 bil.

FGV’s core businesses are palm upstream and downstream, rubber, sugar, research and development and agri-services, trading and marketing, logistics and others.

The upstream palm cluster is FGV’s largest revenue earner and forms the core of the company.

Its managerial turbulence has been one of the country’s most talked about corporate moves, although for the wrong reasons.

At the time of writing, its CEO Datuk Zakaria Arshad is still under suspension pending an internal investigation over an alleged misconduct related to an FGV transaction.

The investigation was initiated by former chairman Tan Sri Isa Abdul Samad in a very public dispute. But Isa has since stepped down and is under investigation by the Malaysian Anti-Corruption Commission (MACC).

Tan Sri Sulaiman Mahbob and Datuk Khairil Anuar Aziz, FGV’s head of logistics and others (LO) division were subsequently appointed as acting chairman and officer-in-charge respectively.

Sulaiman  became FGV acting chairman after Isa stepped down

The leadership uncertainties have led to much speculation on FGV’s future.

Khairil, who is also FGV’s chief operating officer for the LO sector, was appointed the officer-in-charge to temporarily take over Zakaria’s duties and responsibilities.

Khairil is rumoured to be a permanent replacement for Zakaria due to his background as a son of a Felda settler, just like Zakaria.

Exerting influence

However, critics point out that Khairil’s lack of a track record in the plantation industry could be a shortcoming in leading FGV out of the woods.

In July, FGV added three Felda representatives to its board of directors. Many took this as a strong signal of Felda’s increasing influence in FGV’s future direction.

The new FGV directors include Felda’s acting director general Ab Ghani Mohd Ali, Pahang state Felda affairs committee chairman Datuk Abu Bakar Harun, and Felda deputy director-general (management) Datuk Muzzammil Mohd Nor.

Perhaps the emergence of Khairil, whose expertise is in the logistics industry, could point to another direction for FGV’s future businesses.

Last month, he said FGV will teaazm up with other players to bid for logistics jobs in the RM55 bil East Coast Rail Link (ECRL) project.

He said FGV has advantages over other players because its facilities are within Kuantan Port’s vicinity. ECRL’s construction will also start in Kuantan before expanding to Kelantan and Selangor.

The ECRL involves the construction of a 688km rail track. It is also part of China’s “One Belt, One Road” initiative.

“FGV could be lobbying to get more government infrastructure jobs to offset its troubles in the plantation sector.

“If that is the case, Khairil could be a key figure for it to move  forward,” says the analyst.

Smart chip maker Iris has almost mirrored FGV in its managerial turmoil this year. However, unlike the latter, it has taken some steps towards managerial stability.

Nik Azman was made
Iris’ chairman after the company announced cornerstone investors

Last month, it appointed FIC director Datuk Nik Azman Mohd Zain as chairman and Datuk Rozabil Abdul Rahman as executive deputy chairman.

Rozabil and his business partner Datuk Poh Yang Hong who was also appointed a director in Iris, are expected to be key figures in charting a new course for the company which has been in the doldrums the past two years.

“Despite its troubles, Iris still has the potential to turn around due to its technological track record.

“It became side-tracked by non-core businesses, and Rozabil needs to refocus on the company’s strengths.

“The company needs a strong management and board of directors to inject new life into it,” says the analyst.

In July, Iris completed a private placement exercise which saw Rozabil and Poh taking a 9% stake in it through Caprice Capital International Ltd, a company where Poh is CEO.

Poh also holds a 65% stake in Caprice Capital, while Rozabil holds the rest. The placement raised RM31.46 mil.

Iris plans to use the proceeds to meet its working capital requirements and for future business projects.

Rozabil is the largest shareholder of listed Destini Bhd, an integrated engineering solutions provider.

He is the largest shareholder with a 24.18% stake while the second largest is Aromas Teraju Sdn Bhd, a company owned by the Ministry of Finance.

Poh previously held various positions in the Hong Leong Group, including as managing director of its corporate and private equity department, Group Investment of HL Management Co Sdn Bhd.

Felda is Iris’ biggest shareholder with 19%. In 2013, it bought a 25% stake in Iris through FIC, by way of a private placement exercise. The deal was worth RM110.3 mil.

Other than its financial woes, Iris has also been in managerial limbo since the end of last year with its top two executives taking leave of absence for different reasons.

Its CEO Datuk Tan Say Jim has been on leave since November last year.

Deputy managing director Hamdan Mohd Hassan took over the reins in January but was arrested by the MACC on allegations of abuse of power and corruption in an e-passport project for the government of the Republic of Guinea.

Hamdan announced his retirement on Sept 6 during the company’s annual general meeting. He was previously suspended pending completion of investigations. Chief operating officer Choong Choo Hock is acting CEO.

Iris’ fortunes began to nosedive since December 2015 when it lost its lucrative RM318.75 mil government contract to supply 12.5 mil passport smart chips.

The five-year rolling contract was bagged by Datasonic Group Bhd and runs from Dec 1, last year, to Nov 30, 2021.

The loss of this contract was the second major blow for Iris. Before that, in 2011, Datasonic wrested its government contract to supply new raw MyKad.

Both Iris and Datasonic were once part of a consortium called GMPC Corporation, which was formed to spearhead the MyKad programme in 1999.

Iris has been trying to restructure by refocusing on its core trusted identification business and dispose non-core businesses such as property development and agriculture.

It also controls a majority stake is property development and construction firm Encorp where it owns a 70.82% stake through FIC.

Felda achieved this in 2014 when it bought out Encorp’s total shareholdings that was held by two major shareholders for RM239.72mil.

Last month, it announced Isa’s resignation as chairman and his replacement by Datuk Syed Mohamed Syed Ibrahim.

Syed Mohamed is also Iskandar Waterfront Holdings Sdn Bhd's president and executive director

Two Felda directors, Datuk Noor Ehsanuddin Mohd Harun Narrashid and Datuk Hanapi Suhada, also stepped down and were replaced by Datuk Muzzammil Mohd Nor and Hussein Ismail.

Muzzammil is Felda deputy director-general (management), Syed Mohamed is Iskandar Waterfront Holdings Sdn Bhd president and executive director, while Hussein is also a director in Iris.

Below expectations

Although Encorp has remained largely profitable since Felda took control, an analyst says it has not lived up to expectations.

“There were hopes that the Encorp deal would make Felda a major property player. This didn’t happen and its performance has largely been poor.

“The property market has also put a damper on some of its large developments such as the Bukit Katil project in Melaka,” the analyst says.

Last month, Encorp cancelled its joint development plan in Bukit Katil with Tiong Nam Logistics Holdings Bhd’s unit Tiong Nam Properties Sdn Bhd.

Encorp is the master developer of Felda’s 259.4ha leasehold land in Bukit Katil. In October last year, it signed memoranda of understanding (MOU) with three companies, including Tiong Nam Properties, to jointly develop the project.

The other MOUs were with Sinmah Capital Bhd (formerly Farm Best Bhd) and Kean Leng Construction Sdn Bhd. In July, Encorp said it will also not proceed with its MOU with Kean Leng.

Nevertheless, it is still proceeding with Sinmah Capital to develop 31.5ha in Bukit Katil into a mixed development project with a gross development value of RM865 mil.

Critics jumped on Isa who is also Encorp chairman for purchasing the Bukit Katil land from its parent company for RM583.6mil, to be paid on a deferred basis over 13 years.

The entire Bukit Katil project has since been scaled down. Initially, it was estimated to have a gross development value of RM4.9 bil but has been revised to RM3.2 bil.

Company profiles

Felda Global Ventures Holdings Bhd

FGV is the world’s largest crude palm oil producer and the second largest Malaysian palm oil refinery. It outputs three million tonnes annually from 69 palm oil mills.

It is also the world’s third largest oil palm estate operator, managing more than 450,000ha across the country, and Kalimantan, Indonesia.

The company processes over 15 million tonnes of fresh fruit bunches (FFB) annually, of which five million tonnes are from its own plantations and the balance from Felda settlers and independent suppliers.

FGV’s largest plantations in the country are in Pahang and Sabah. It owns Pontian United Plantations Berhad (PUP) which operates 15,161ha of oil palm plantations in Sabah.

In Indonesia, FGV’s activities are focused in Kalimantan through PT Citra Niaga Perkasa, a company that owns 14,385ha.

Through its subsidiaries PT Temila Agro Abadi and PT Landak Bhakti Palma, FGV owns another 21,037ha in West Kalimantan.

FGV has a land-lease agreement (LLA) with its parent, Felda, which it signed in 2012.

It states that FGV has to pay Felda RM248 mil yearly for 20 years, plus a 15% share of the operating profit from the sales of FFB gained from the leased land.

Since its listing in 2012, FGV reportedly tried to improve the terms of the LLA which has been a drag on its earnings.

But the terms and conditions of the LLA has yet to be modified. FGV pays the LLA fees on a quarterly basis.

Through its listed subsidiary MSM Malaysia Holdings Bhd (MSM), FGV is the leading refined sugar producer in the country with almost a two-thirds domestic market share.

It is primarily involved in the production of refined sugar products, with an annual production capacity of over 1.1 million tonnes.

MSM Holdings operates through its two subsidiaries – MSM Prai Bhd (formerly known as Malayan Sugar Manufacturing Company Bhd) and MSM Perlis Sdn Bhd (formerly known as Kilang Gula Felda Perlis Sdn Bhd).

The subsidiaries are pioneers in Malaysia’s sugar industry and were established in 1959 and 1971 respectively.

FGV targets to be Asean’s largest sugar hub by producing 3.25 million tonnes per annum by 2025.


Iris Corporation Bhd

Iris is a global player with core expertise in digital identity, business, farming and environmental solutions.

It was incorporated in 1994 and was the first company in Asia to set up a fully integrated manufacturing facility for contact and contactless smart cards, contactless document inserts and assembled modules in tapes and reels.

The company pioneered the world’s first electronic passport and national multi-application smart card with the implementation of the Malaysian electronic passport in March 1998 and MyKAD – the government’s multi-purpose card – in April 2001.

These technologies are also deployed in many countries across Asia, the Middle East, and Africa.

Datuk Tan Say Jim is Iris’ co-founder and managing director. He began his career with UMW Holdings Bhd and was the group finance manager when he left the company in 1986.

Prior to joining Iris, Tan was with the Lion Group as the group treasurer, a post he held until 1997.

In FY17 ended March 31, Iris derived 85% of its revenue from its trusted identification division with an operational profit of RM71.2 mil.

During the period, it also secured a new RM364 mil contract to supply a new system for the production of Senegal’s national biometric identity and built-in voters’ card.

In April, Iris announced it will partner Norwegian biometrics company Zwipe to explore potential opportunities for biometric smart card applications in Malaysia.

Iris and Zwipe are looking at ways to bring new technology into the market and expand the business.

They will also work closely in areas of government identification and payments for the domestic and international markets.

In May, Iris announced its partnership with TruTag Technologies Inc, a US authentication and digital security company, to look into the global potential for smart cards and secure label applications.

TruTag has manufacturing facilities in Hawaii and claims to be the only company in the world with covert and edible optical memory microtags that can be applied to consumables (pharmaceuticals, food and beverage) and secure documents.

The parties signed a letter of intent to jointly develop smart cards and secure label applications to help enhance traceability and security document identification, eliminate counterfeit products and improve supply chain visibility.


Encorp Bhd

Encorp was formed in March 2000 and was listed on Bursa Malaysia in February 2003. Its core business is in property development.

It has been involved in commercial and residential developments in the country and Australia.

Encorp’s project includes the Encorp Strand in Kota Damansara, Encorp Cahaya Alam in Shah Alam, Encorp Marina Puteri Harbour in Iskandar Malaysia, and The Residences on McCallum Lane in Perth, Australia.

Encorp officially opened its first retail mall Encorp Strand Mall in 2014.

Located on an 18.6ha leasehold parcel in Kota Damansara, Selangor, it has 435,000 sq ft of net lettable area and is a joint venture between Encorp and the Selangor State Development Corp.

The company’s Group CEO is Datuk Zakaria Nordin who was appointed to the post in February last year.

He began his career with Felda as an assistant surveyor from 1980-1982. Between 1985 and 1999 he was a businessman involved in construction and development projects.

In 1999, Zakaria was elected state assemblyman for Ampangan, Negeri Sembilan, and became a member of the state executive council from then to 2008.

In 2014, Felda Investment Corp (FIC), which is Felda’s investment arm acquired 49.45% of Encorp from Lavista Sdn Bhd and Pegang Impian Holdings Sdn Bhd through separate conditional sales and purchase agreements.

Lavista disposed its 29.85% stake to FIC for RM133.69 mil cash while Pegang Impian sold its 19.6% interest in Encorp for RM106 mil.

Prior to the Felda deal, in July 2013 former Encorp group CEO Yeoh Soo Ann and former Encorp chief operating officer Mohd Ibrahim Masrukin undertook a management buyout of Encorp by acquiring Lavista Sdn Bhd.

Lavista was the private vehicle of former Encorp executive chairman Datuk Seri Effendi Norwawi who owned a 30.55% stake and founded the company in 1995.

Effendi was a federal minister in the prime minister’s department in charge of the Economic Planning Unit from 2006 to 2008.

He was also a special envoy for the Ministry of Higher Education (2005-2006), agriculture minister (1999-2004), and member of the Sarawak legislative assembly (1991-1999).

Politics apart, in 1998 he also founded free-to-air TV station, NTV7.

This article first appeared in Focus Malaysia Issue 249.