Federal Land Development Authority (Felda) said its acquisition of a non-controlling stake in Indonesia's PT Eagle High Plantations Tbk - which has come under heavy criticism - was solely the government's decision.

"We are pursuing this [Eagle High] because it is on behalf of the government. It is not because we are using our resources, we are not using any of our funds within FELDA to buy Eagle High - it's purely a government investment." Tan Sri Shahrir Samad told BFM.

Newly appointed Chairman Shahrir was responding to a question on the Breakfast Grille show this morning, justifying FELDA's decision to pay a premium price for a minority stake in a loss-making Indonesian palm oil plantation company.

This move comes after Shahrir's vow to improve FELDA's corporate governance, in which it has ordered all members of its wholly-owned FELDA Investment Corporation's board to resign, as its first order of business.

FELDA had asserted on Dec 29 last year that it had secured government financing to fund its US$505.4 million purchase of a 37% stake in Eagle High.

However, analysts have questioned FELDA's acquisition which came at a 95% premium to Eagle High's previous closing share price, which did not come with management control.

Eagle High's net loss for its nine months ended Sept 30, 2016 widened to RM100 million, from RM27 million a year ago, weighed down by weak fresh fruit bunch production and huge interest expenses.

Meanwhile, Shahrir refuted that he has made a U-turn in his statement a few days ago - where media reports claim he questioned the missing RM4.3 billion of the RM6 billion raised from the listing of FELDA Global Ventures.

"What I said simply was that saya kena cari ke mana perginya, as this is part of my job, never in my conversation [with the media] that I used a Malay word like 'hilang'."

Shahrir said that, going forward, FELDA's utmost priority will be to stabilize its cash flow. It has just sold a 1.9% stake in Maybank for RM282 million last month.

Shahrir has singled out the prospective sale of its Bayswater hotel, citing that the asset has matured and the value has appreciated since it purchased it in Dec 2014.

This year I'm looking to borrowing some money and in the interim to sell our assets through our [Bayswater] hotel in London. But other investments that we have i.e. 71% in Encorp and 21% in Iris Corp - we have to look at them closely," he said, citing that he sees longer-term value in both Encorp and Iris.

Listen to the full podcast here

FELDA Rebuild: PR Job or Hard Restructure?

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