Why you should not apply Felda Global Ventures Holdings Berhad IPO?

Why you should not apply Felda Global Ventures Holdings Berhad IPO?: 1)The chances of getting the Felda Global Ventures Holdings Berhad IPO are very low. See my calculation at the bottom of the points.

2)The prospect of Felda Global Ventures Holdings Berhad may not be so good, and therefore, may not deserve a high Felda stock PE ratio. About 53% of Felda oil palm trees are more than 21 years old, and oil palm trees have an average life of only 25 years. Meaning more than half of Felda Oil Palm tress are about to die. (or do they die? Or just not producing oil palm/ FFB). After the trees die, their profits will drop sharply, am I right?

3)Look at the listing of Facebook IPO.  Facebook stock price started to drop after listing and many incurred losses or paper loss.

4)World economy is not good. World stock markets are dropping and dropping.

5)World Commodities prices are dropping.

6)CPO price is dropping. From the past few months high of RM3,600 in April to currently below RM3,000. After most analysts have came out with Felda Global Ventures Holdings Berhad target price (early last week), the FCPO dropped further.

7)Felda is not an efficient Oil Palm planter. Although their yield is about the same as industry average, they are still below those big planters like IOI.

8)You don’t like the listing of Felda stocks, for whatever reasons, eg political, etc, so you plan to boycott it. Money to you is not very important.

9)Money will be locked up in IPO, better invest elsewhere for better return.

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What are the chances in getting Felda Global Ventures Holdings Berhad IPO?

Let us take previous popular IPO as a guide.

Gas Malaysia 25,680,000 offered to Public at RM2.20. Assuming you use RM20,000 so you applied 9,000 shares. Result shows the chances are 2.44%.

Gas Malaysia    25,680,000 / RM2.20 /  9,000 shares  / 2.44%

PChem  160,000,000 / RM5.05 /  4,000 shares / 18.01%

Bumi Armada 58,569,400 / RM3.15  /  6,000 shares / 4.06%

If I use the three IPO and compute it into Felda IPO shares of 72,963,000, and average it out, I will get 6.73%. That is assuming applying for 4,400 shares. But because Felda got more people apply, due to more popular and Felda research analysis reports gave a higher Felda fair value, so the percentage can easily drop to 5.00%.

Everybody is talking about 20% gain.

In “probability method” that we had studied in school, 20% gain X 5% chances is 1% gain.

If you strike Felda IPO RM20,000 X 20% gain, you will get RM4,000. But on the average you need to try 20 times then only can strike one time.

Your RM20,000 will then become gain of RM200 on the average.

If 10% gain, then your return will be 0.5% or RM100 on the average.

Anyway, who says Felda can list more than 10% of Felda IPO price?

I am not being negative here. Because I heard too much good thing about Felda, so I present something negative to balance out.

Please note that all the points above are for case study purpose. Individuals have to make own decisions and please consult your financial advisers.

For more information on Felda Global Ventures Holdings Berhad IPO here, PE ratio and target price
http://politemarket.blogspot.com/search/label/Felda

More information on Gas Malaysia IPO here, PE ratio and Target Price.
http://politemarket.blogspot.com/search/label/Gas%20Malaysia

For more information on IPO here.
http://politemarket.blogspot.com/search/label/IPO

  

Thanks