FGV Acquires Zhong Ling

Media ReleaseZhong Ling Acquisition to Strengthen FGV’s Downstream Position in China

 

KUALA LUMPUR, 16 MARCH 2016 – Felda Global Ventures Holdings Berhad (FGV) is confident its latest venture, the planned earning accretive acquisition of a 55% stake (valued at RM976.25 million) in Zhong Ling Nutril-Oil Holdings Limited (Zhong Ling), will strengthen its presence in high margin downstream activities.

As part of its transformation strategy and aggressive growth plans, FGV has identified the Chinese market as a key pillar of revenue enhancement for the Group, and plans to strengthen its position in China through a strategic acquisition of a stake in a well-known local player.

China is one of the world’s fastest-growing major economies, with Gross Domestic Product (GDP) growth rates averaging 7% from 2014 to 2015. With a population of almost 1.4 billion people, China has become one of the most important markets in the world for edible oils. 

As the largest importer of edible oils, China consumes almost a quarter of the world’s total edible oils (20% of worldwide consumption). FGV views China’s increasing demand potential as an attractive prospective market for expansion of FGV’s downstream capabilities, particularly in the Consumer Packed Goods (CPG) business.

The strong demand for blended cooking oil in China is also anticipated to provide an avenue for FGV’s palm-based products in the massive Chinese market. Ultimately, the Group will be able to penetrate further downstream palm-based products such as margarine, shortenings and food processing ingredients.

According to FGV’s Group President and Chief Executive Officer, Dato’ Mohd Emir Mavani Abdullah: “We view Zhong Ling as a strong local partner for FGV’s downstream expansion in China not only because of its solid brand and deep market insights, but also for it being ranked 10th in the retail cooking oil market in China. Zhong Ling will be a firm avenue for distributing our palm oil products which is our main intention.” 

Established more than 20 years ago, Zhong Ling has a sales network of 60,000 retail outlets covering five southeast coastal provinces of Fujian, Jiangxi, Guangdong, Zhejiang and Jiangsu.

Since its establishment, Zhong Ling has experienced tremendous growth, recording a Compound Annual Growth Rate (CAGR) of about 20% in revenue over the past four years and generating average profit margins in the region of 14% annually (2011-2014). In 2014, the company posted total revenue of RMB2.32 billion (RM1.5 billion), generating RMB326 million (RM207 million) in profits. Furthermore, based on its 2015 management account, Zhong Ling is backed by more than RMB1.0 billion (RM635 million) cash reserve and, most importantly, is a debt free company.

The intended investment has cleared all necessary due diligence, in accordance with FGV’s investment and governance policies. The financial and tax due diligence that FGV has performed covers Zhong Ling’s financials. All subsidiaries under Zhong Ling have been audited annually in accordance with China’s regulations.

In 2011, FGV has made its first foray into China through its joint venture FELDA IFFCO Sdn Bhd. Its subsidiary FELDA IFFCO South China Ltd, which operates in Guangdong, has two refineries and the second largest tank farm in South China. The company manufactures and markets a range of edible oils and fats including shortening and specialty fats for the large and growing Chinese market.

A Negative Proton

Protons are supposed to be positive charged. Somehow, that is not part of the traits of our beloved Proton. Don’t get me wrong. Proton has mostly churned out good cars. My first car, the Proton Saga Megavalve, was with me for 16 years before I used a Perdana V6. It was only in 2011 that I switched to a Japanese model and is still using it. Entitled to a Kia Sorento from the company I prefer using a Proton Pesona because it’s zippy, reliable, and fits me going to either Hilton Sentral for meetings or to drive  into a construction site. I love Proton, but I don’t love the case the Protun group has put through:

  

 The above post invited a rebuttal by their opponents:

 I don’t know who are the Protun people trying to kid.

Proton started off with RM6 billion for two plants. It became very profitable in the mid 1980s and 1990s that its distributor EON, bought a bank and named it EON Bank! Over 30 years the Research and Development costs have totalled RM18 billion. However, Proton also has to pay royalty to Mitsubishi and as at 2003, that has amounted to RM17 billion. I’ll leave the total up to 2015 to your imagination.

Then for some reason Proton lost its edge and perhaps the drive and direction that Petronas had had to bail Proton out with a at least RM1 billion injection . Coincidentally both Petronas and Proton share the same adviser.

Don’t forget Proton also lost about RM1 billion (estimated) after discarding MV Agusta and Lotus! Bad management decision after a bad advice I assume.

In the end, Khazanah has had to step in through the acquisition of shares that must have cost around RM1 billion!

After 30 years in operation and RM44 billion spent, Proton still cannot make its own cars and have to rely on designs and engines from outside and is probably no different to Naza that sells rebranded cars. Yet it needs a capital injection of RM3 billion to produce new models! Three months later, Proton requested for a RM1.7 billion grant from theEconomic Council chaired by Najib Razak

So more needs to be injected using the taxpayers’ money after 30 years while the rakyat will have to be contented with buying overpriced cars. While 1MDB has all but settled its problems, Proton is still looking for a business model that works and that after 30 years!

Instead of blindly attacking 1MDB and other efforts by the Najib administration, Mahathir should just focus on steering Proton the right way towards profatibility and giving the rakyat the access to affordable quality cars.

And instead of spending millions on birthday bashes for him, maybe Mahathir ought to ask his cronies to take up equity in Proton and actually work for money.

He would whine less and be less grumpy when at least one of his efforts actually works.

  

RM623.3 billion… AND FALLING!

  
One look at the headline above and the untrained mind would scream in panic.

However…

According to a parliament answer by Deputy Finance Minister Johari, as at end Sept 30, 2015 our govt debt is now at RM623.3 billion, which is 50.7% of GDP – dropping from 52.8% (RM568,8 billion at June 30, 2014) and 54.7% (RM547.6 billion as at end 2013).

Our debt has increased but our country’s GDP (our national income) has increased much faster due to our steady GDP growth – hence the sizeable drop in the Debt to GDP ratio.
At 50.7% Debt to GDP ratio, according to the CIA fact-book, more than 70 other countries in the world will have to go bankrupt before it reaches our turn.
These countries include: Japan Zimbabwe Greece Lebanon Jamaica Italy Portugal Eritrea Cabo Verde Grenada Ireland Cyprus Belgium Singapore Barbados Spain Puerto Rico France Canada Egypt Bhutan Jordan Antigua And Barbuda United Kingdom Iceland Croatia Austria Saint Kitts And Nevis Belize Saint Lucia Hungary United States Germany Morocco Sudan Albania Sri Lanka Ghana Ukraine Dominica Serbia Sao Tome And Principe Netherlands Malta Aruba Saint Vincent And The Grenadines Israel Seychelles Pakistan Guyana Uruguay El Salvador Mauritius Slovenia Malawi Mozambique Montenegro Finland Brazil Bahamas, The Yemen Costa Rica Slovakia Senegal Vietnam Venezuela India Marshall Islands Syria 
The steady drop in our Debt-To-GDP ratio is due to our shrinking yearly budget deficits which have been reducing every year to only 3.2% this year and targeted at 3.1% next year.

The federal government debt as of Sept 30 this year was at RM623.3 billion, said Deputy Finance Minister Johari Abdul Ghani.

“Of this amount, 96.4 percent or RM601.1 billion was domestic debt, with the balance of RM22.2 billion or 3.6 percent being offshore loans in various denominations of currency.
“The government debt is manageable and categorised as a country with moderate indebtedness,” he told the Dewan Rakyat today.
He said this in response to a question from Ahmad Hamzah (BN-Jasin) who asked for clarification from the finance minister on the federal government debt.
Johari said the level of the federal government debt for the stated period to the Gross Domestic Product (GDP) was 50.7 percent.
—-
https://www.cia.gov/library/publications/the-world-factbook/rankorder/2186rank.html
http://www.malaysiakini.com/news/322001
http://www.themalaysianinsider.com/bahasa/article/hutang-negara-rm568.9-bilion-atau-52.8-daripada-kdnk

  

Darth Sidious Makes Perfect Economic Sense

  
The Emperor has spoken.

In a statement posted by Malaysiakini his Lordship has made it clear that in order for the economy to recover, the rebel Najib Razak must he removed. Only then will worldwide commodity prices rise, China’s stock markets will improve, oil prices will hit USD200 per barrel, the oil and gas company Hercules will rise from the dead, and oil and gas companies like Technip, Schlumberger etc will reinstate tens of thousands of workers who lost their job because of Najib and the 1MDB.

In a related development, the Jawas on Tattooine have also complained about plunging sales of used droids saying the steep rise of the USD against other galactic currencies have hurt their livelihood.

It is a known fact published by the various zombie-portals that Najib Razak, the rebel from planet Pekan, has been undermining the economy of virtually all star systems within this galaxy.

The Zombie Apocalypse 

I’m sharing the item below because it is very relevant to those who fear the decline of the Ringgit versus the Greenback. This fear is further underscored by zombies who think the world is going to end tomorrow.

Malay Mail Online) – Today, the Ringgit breached RM4.00 for a dollar.
When I logged in to my Facebook and Twitter accounts, 9 out of 10 posts that appeared on my timeline were slamming the Government on the Ringgit.
To sum them up, youths who dominate social media today were posting comments as though tomorrow spells the end for Malaysia.
And in just the past month, I saw how Malaysians transform from being constitutional experts, to aviation analysts and now economics.
Some even went as far as pushing the blame on Umno and Najib. There’s this group called Suara Rakyat who likes to say “other countries are doing better because Umno is not there in their country”.
Of course, when you have a narrow, myopic view, you will tend to miss out the fact that over the 5 year period,
• Russian Roubles lost 114per cent against USD
• Indonesian Rupiah lost 51per cent against USD
• Indian Rupees lost 38per cent against USD
• Norwegian Krone lost 37per cent against USD
• Australian Dollars lost 24per cent against USD
• Euro lost 20per cent against USD
• Thai Baht lost 10per cent against USD
Do I need to go on?
One of the contributing factors faced by these countries is the drop in oil prices. Crude oil was trading at US$70-80/bbl few years ago and today it has fallen below US$ 50 per bbl. 
Also, US is not our only trading partner and the performance of our Ringgit is not measured against US dollars alone.
When we look at the Ringgit, 
• we strengthened against Canadian Dollars (2per cent)
• we strengthened against Indian Rupees (10 per cent)
• we strengthened against Japanese Yen (14 per cent)
• we strengthened against Indonesian Rupiah (18 per cent) 
I don’t need to name more currencies, do I?
Do you know that the value of our trade with India, Japan and Indonesia is close to 20per cent?
Understandably, we are quick to feed on negative news and quick to comment like an expert on our Facebook and Twitter. That’s how things work these days.
Of course, none of you made reference to 1998. 
No one remembered the time when the Ringgit crashed to as low as RM4.725 for a dollar on 7 January 1998 (BNM selling rate, over the counter was more than RM4.80).
All of you, who were quick to comment about the state of our economy on your Facebook, were still in school.
So none of you knew, none of you remembered, none of you experienced what happened in 1998 when Anwar Ibrahim was Finance Minister.
Back then
a) People were losing jobs or had difficulty in getting jobs
b) Households were squeezed
b) average lending rate was 12.16 per cent
c) Inflation was close to 3 per cent without subsidy removals. 
If any of you doubt the 2-3 per cent inflation numbers today and felt it is way higher, apply the same thought to 1998-1999.
And yes, average lending rate was over 12 per cent. Those were the days.
You may say it is history and you may continue to slam the Prime Minister, the Central Bank and the Government for today’s numbers.
But the next time before you give you get upset and share your anger on Facebook or Twitter, ask yourself whether or not the Ringgit — Dollar exchange rate affects you, and how.
1. Do you shop online from US websites? 
2. Are you planning to fly over to US for a holiday?
3. Are you a Malaysian studying in the US?
4. Do you import goods to be resold in Malaysia?
5. Do you buy necessities and food from the US to use here?
6. Do you at all use the US dollar in your daily life?
Because my dear, only if you answer yes to the above, you are affected. Otherwise, what are you shouting and so worried about?
Your salary is still denominated in Ringgit and you don’t buy necessities with US dollars. 
Sure, no one can deny that it has some impact to some segments especially imports and our plans to travel to US, UK etc. I am also of the opinion that there are many things Najib can do (which he isn’t at all now) and I will share more soon.
And guys, the international ratings agencies — Fitch, Moody’s and S&P — have all maintained Malaysia’s outlook as stable.
There are no economists out there who are saying that Malaysia’s economy will collapse, only politicians are saying this.