Shares of Malaysian palm oil giant Felda soared as much as 20 percent in their first day of trading yesterday, overcoming weakness in global stock markets after the company completed the world’s biggest initial public offering (IPO) this year after Facebook.
State-backed Felda Global Venture Holdings hit a high of 5.46 ringgit shortly after listing on the main board of Bursa Malaysia, up from its IPO price of 4.55 ringgit. It eased to 5.29 ringgit at the end of the morning session.
Felda’s first-day jump defies sustained weakness in global stock markets and reflects strong investor interest in the world’s third-largest palm oil company.
It also offset worries over a lower-than-expected net profit in the quarter through March.
Felda raised about 10 billion ringgit (US$3.1 billion) in the largest IPO in Asia this year. It is the second-biggest in the world after Facebook, which raised US$16 billion, but suffered a slumping share price after its listing last month. A volatile global economy has led to the shelving of several major IPOs in Asia, including a planned US$2.5 billion share sale by Formula One in Singapore and a US$1.5 billion listing of London-based Graff Diamonds in Hong Kong.
However, Felda’s IPO was supported by 12 institutional investors, including Qatar Investment and French agribusiness giant Louis Dreyfus.
Feldal president Sabri Ahmad said the share price was within expectations. He said Felda, which also plants rubber and sugar cane, would expand in Southeast Asia and Africa.
“Food business is quite resilient in a recession,” he said.
The IPO had met resistance from thousands of ethnic Malay farmers, who partly own the company and fear they would lose out. However, its strong trading debut is expected to help quell concerns and will boost Malaysian Prime Minister Najib Razak, who is expected to call general elections this year. Felda was set up by the government in the 1950s as part of a rural development plan to alleviate poverty by giving poor Malaysians land to grow cash crops, mainly palm oil and rubber.
Najib has assured the farmers that the listing would be profitable for them, and promised a 1.68 billion ringgit windfall for the farmers and their families. Felda has also allocated 20 percent of its shares to a trust fund for the farmers, who will receive annual dividends, officials said.
The Felda group owns 70 palm oil mills, seven refineries and a string of other manufacturing plants nationwide. It produces about 3 million tonnes of crude palm oil annually, or about 8 percent of world output.
After Felda, Asia’s largest hospital operator, Integrated Healthcare Holdings, is also planning an IPO that could raise as much as 1.9 billion ringgit.