The Malaysian Government is studying all five proposals and the Prime Minister hints that he would mention something about them in his budget speech on Friday
Prime Minister Datuk Seri Najib Razak yesterday revealed that there were in fact five proposals made to buy over the government's stake in UEM Group Bhd.
The market had hitherto known of only two: one submitted by MMC Corp Bhd and the other by privately-owned Asas Serba Sdn Bhd, which proposed several months ago to buy over UEM listed unit PLUS Expressways Bhd.
Najib, who made the disclosure in Putrajaya, said the government was studying all five proposals.
"There are five proposals (which are) very interesting propositions (involving) companies and innovative methods," Najib told reporters after launching the 61st Session of the World Health Organisation Regional Committee for the Western Pacific.
The Prime Minister did not elaborate on the proposals, but hinted that he would mention something about them in his budget speech on Friday.
UEM has been eyed by potential suitors of late, with analysts saying that the gem attracting interest is PLUS, concessionaire for most of the highways in the country, including the heavily-used North-South Expressway.
Apart from MMC, which said that it had submitted an early proposal to the government, Asas Serba has also made known its intention to acquire PLUS.
In making its proposal public several months ago, Asas Serba promised that it would keep the toll rates low.
The stake in PLUS, and UEM, which outside companies are eyeing is owned by government sovereign fund manager Khazanah Nasional Bhd.
Khazanah managing director Tan Sri Azman Mokhtar has pointed out that PLUS is a critical national asset.
He also said that the toll highway concessionaire is well managed.
Azman said that a decision on the proposals would not take too long and that the government would look at all aspects of the proposals, including the one from MMC.
Read more: 5 bids to buy over UEM http://www.btimes.com.my/Current_News/BTIMES/articles/PMUEM-2/Article/index_html#ixzz1265eOs00
Showing posts with label MMC. Show all posts
Showing posts with label MMC. Show all posts
Monday, October 11, 2010
Saturday, October 9, 2010
Synergies expected in MMC’s takeover of UEM
KUALA LUMPUR: The planned acquisition of UEM Group by MMC Corp Bhd is seen as a move for the highways under the group but there are other synergies that may be extracted after the takeover.
Sources with knowledge of the proposal say concerns over the indebtedness of MMC are overblown should MMC secure PLUS Expressways Bhd as the shared benefits from other businesses in UEM would offset the reduction in profit from the capping of toll rates.
“There is great opportunity for the two entities to combine their expertise and further strengthen their position in the various sectors,” said the source. “These synergies could invariably unlock benefits in terms of scale and efficiency, which could translate into higher margins and returns.”
In some ways, UEM and MMC share a number of similarities.
UEM has built highways and bridges while MMC was part of the consortium that built the SMART tunnel and is currently involved in the electrified double-tracking railway project.
In terms of land, MMC has almost 5,000 acres in Johor, which ranks it as one of the biggest private land owners in the country. With UEM Land, too, a major player in the property development business in Johor, and with relationship between Malaysia and Singapore warming up, the combination of both companies’ assets would be positive and add value to MMC.
“This can go both ways as MMC may have areas of strength from which UEM may tap into, which ultimately will enhance their value to their shareholders,” said the source.
The source said that should the proposal of no toll increases and no extension of the concession period materialise, it would benefit both the Government and the people.
“This would mean the rakyat would not bear the burden of increased costs and this also relieves the Government from the burden of having to manage this strategic asset and entrust the private sector to carry out this responsibility efficiently within the set parameters,” the source added.
Banking sources said the fear many had from the capping of toll rates would mean increased risks for any concessionaire.
With the proposed minimum wage set to be implemented in the near future, and also a proposed high-speed rail link that not only goes to Singapore but eventually up north in the peninsula, that should lead to cost rises and even a decline in traffic flow on the highways.
Should traffic growth on the highways drops, then revenue will shrink and the debt taken to fund the acquisition of UEM becomes shaky.
“What guarantee is there that this would not happen?” the banking source asked, adding that bonds would then have to be restructured and bondholders and stakeholders stand to lose a lot of money.
Sources with knowledge of the proposal said like any business initiative, the management would have to ensure that all revenues were maximised and costs minimised.
“In a situation where revenue from the toll concession would be capped for the remainder of the term, a careful assessment of the areas within the group must be made to identify where revenue may be enhanced and costs reduced without compromising service levels,” said the source.
The thought is that MMC may implement both revenue-enhancing and cost-saving initiatives in order to mitigate the reduction in profit from the cap on toll rate.
“This can be better accomplished with the synergies MMC would achieve with the takeover,” said the source, which added that MMC’s proposal would presumably incorporate the relevant capex required to ensure that the interests of road users were not compromised.
The proposed acquisition of UEM would be funded via a combination of debt and equity and the believe is that the debt-equity ratio is expected to be in line with what is required to meet the returns by both the lenders and the equity investors.
“As there is sufficient liquidity in the domestic loan and bond market, support for such acquisition funding would be accessible,” said the source.
Whether MMC can afford to buy over UEM considering the reported RM15.6bil purchase price has been flagged as a concern given the leverage MMC is carrying but the source said the gearing of the group was 2.4 times based on borrowings and debt and much of that was attributed to Malakoff Corp Bhd.
Malakoff had approximately RM14bil of debt as at June 30, 2010 and those debts were mainly project financing and “ring-fenced”.
“Malakoff’s cashflow is reported to be sufficient to service its debt obligations in a timely manner, thus should not be a cause for undue worry to investors,” said the source.
MMC on its own has a gearing of less than 0.8 times.
MMC’s preliminary bid for UEM has been submitted to the Government and institutional fund giants EPF and PNB have not yet been approached to be its partner in the takeover of UEM.
The source said that if the Employees Provident Fund and Permodalan Nasional Bhd are approached by MMC to be their partners in the takeover of UEM, it’s likely that those bodies will evaluate the merits of the proposal and make the appropriate investment decision or recommendation.
“If MMC’s proposal can provide a reasonable yield to interested investors on a recurring basis, there is no reason why it should not attract the required participation,” said the source.
Although there are complementary businesses between MMC and UEM where synergies may be extracted, a divestment of non-core business post-acquisition could very well take place.
“Therefore, it would not be unreasonable to assume that MMC would undertake a rebalancing of its portfolio post-acquisition and divest non-core businesses or realign certain businesses as part of its strategy,” said the source.
To answer concerns that the bid might undervalue the value of UEM, the source said the RM15.6bil acquisition price was also not set in stone.
“The proposal is still at the preliminary stage and it is likely that MMC will need to review the consideration price post-due diligence,” said the source.
Sources with knowledge of the proposal say concerns over the indebtedness of MMC are overblown should MMC secure PLUS Expressways Bhd as the shared benefits from other businesses in UEM would offset the reduction in profit from the capping of toll rates.
“There is great opportunity for the two entities to combine their expertise and further strengthen their position in the various sectors,” said the source. “These synergies could invariably unlock benefits in terms of scale and efficiency, which could translate into higher margins and returns.”
In some ways, UEM and MMC share a number of similarities.
UEM has built highways and bridges while MMC was part of the consortium that built the SMART tunnel and is currently involved in the electrified double-tracking railway project.
In terms of land, MMC has almost 5,000 acres in Johor, which ranks it as one of the biggest private land owners in the country. With UEM Land, too, a major player in the property development business in Johor, and with relationship between Malaysia and Singapore warming up, the combination of both companies’ assets would be positive and add value to MMC.
“This can go both ways as MMC may have areas of strength from which UEM may tap into, which ultimately will enhance their value to their shareholders,” said the source.
The source said that should the proposal of no toll increases and no extension of the concession period materialise, it would benefit both the Government and the people.
“This would mean the rakyat would not bear the burden of increased costs and this also relieves the Government from the burden of having to manage this strategic asset and entrust the private sector to carry out this responsibility efficiently within the set parameters,” the source added.
Banking sources said the fear many had from the capping of toll rates would mean increased risks for any concessionaire.
With the proposed minimum wage set to be implemented in the near future, and also a proposed high-speed rail link that not only goes to Singapore but eventually up north in the peninsula, that should lead to cost rises and even a decline in traffic flow on the highways.
Should traffic growth on the highways drops, then revenue will shrink and the debt taken to fund the acquisition of UEM becomes shaky.
“What guarantee is there that this would not happen?” the banking source asked, adding that bonds would then have to be restructured and bondholders and stakeholders stand to lose a lot of money.
Sources with knowledge of the proposal said like any business initiative, the management would have to ensure that all revenues were maximised and costs minimised.
“In a situation where revenue from the toll concession would be capped for the remainder of the term, a careful assessment of the areas within the group must be made to identify where revenue may be enhanced and costs reduced without compromising service levels,” said the source.
The thought is that MMC may implement both revenue-enhancing and cost-saving initiatives in order to mitigate the reduction in profit from the cap on toll rate.
“This can be better accomplished with the synergies MMC would achieve with the takeover,” said the source, which added that MMC’s proposal would presumably incorporate the relevant capex required to ensure that the interests of road users were not compromised.
The proposed acquisition of UEM would be funded via a combination of debt and equity and the believe is that the debt-equity ratio is expected to be in line with what is required to meet the returns by both the lenders and the equity investors.
“As there is sufficient liquidity in the domestic loan and bond market, support for such acquisition funding would be accessible,” said the source.
Whether MMC can afford to buy over UEM considering the reported RM15.6bil purchase price has been flagged as a concern given the leverage MMC is carrying but the source said the gearing of the group was 2.4 times based on borrowings and debt and much of that was attributed to Malakoff Corp Bhd.
Malakoff had approximately RM14bil of debt as at June 30, 2010 and those debts were mainly project financing and “ring-fenced”.
“Malakoff’s cashflow is reported to be sufficient to service its debt obligations in a timely manner, thus should not be a cause for undue worry to investors,” said the source.
MMC on its own has a gearing of less than 0.8 times.
MMC’s preliminary bid for UEM has been submitted to the Government and institutional fund giants EPF and PNB have not yet been approached to be its partner in the takeover of UEM.
The source said that if the Employees Provident Fund and Permodalan Nasional Bhd are approached by MMC to be their partners in the takeover of UEM, it’s likely that those bodies will evaluate the merits of the proposal and make the appropriate investment decision or recommendation.
“If MMC’s proposal can provide a reasonable yield to interested investors on a recurring basis, there is no reason why it should not attract the required participation,” said the source.
Although there are complementary businesses between MMC and UEM where synergies may be extracted, a divestment of non-core business post-acquisition could very well take place.
“Therefore, it would not be unreasonable to assume that MMC would undertake a rebalancing of its portfolio post-acquisition and divest non-core businesses or realign certain businesses as part of its strategy,” said the source.
To answer concerns that the bid might undervalue the value of UEM, the source said the RM15.6bil acquisition price was also not set in stone.
“The proposal is still at the preliminary stage and it is likely that MMC will need to review the consideration price post-due diligence,” said the source.
Monday, October 4, 2010
Stocks to watch: MGRC, DiGi, O&G, MMC, EON Cap
KUALA LUMPUR: Markets could start off on Tuesday, Oct 5 on a cautious note in line with the profit taking on Wall Street while at Bursa Malaysia, Malaysian Genomics Resource Centre Bhd (MGRC) will list on the ACE Market.
On Wall Street, U.S. stocks fell in light trading on Monday as investors took profits on recent gains, using middling economic data and worries about euro zone debt as a catalyst for shedding long positions.
The Dow Jones industrial average fell 78.41 points, or 0.72 percent, at 10,751.27. The Standard & Poor's 500 Index lost 9.21 points, or 0.80 percent, at 1,137.03. The Nasdaq Composite Index dropped 26.23 points, or 1.11 percent, at 2,344.52.
Stocks to watch are MGRC, DIGI.COM BHD [], oil and gas (O&G) related companies including Kencana Petroleum Bhd, MMC Corp Bhd and EON CAPITAL BHD [].
MCRC, which focuses on contract genomics services, raised RM18.47 million for its initial public offering at RM1.08 apiece. MGRC announced on Monday it received the approval to implement two genome sequencing and analysis projects from the Malaysian Government. MGRC intends to accept the allocated RM5.97 million, being the first of two tranches
DiGi could stage a rebound after unusual market transactions, in the last 10 minutes of trade, pushed the FBM KLCI into the red. This could raise concerns among market participants over such action which could “destabilise” the market. Market concerns were whether the late sell-off was to impact the KLCI futures.
DiGi closed down RM3.58 to RM21 with 161,000 shares done in the absence of any negative news. This saw RM2.78 billion erased from its market capitalisation to end the day at RM16.327 billion.
The FBM KLCI, which was trading around the 1,470 level throughout the day, fell 4.05 points to close at 1,462.27. The KLCI futures fell 8.5 points to 1,464.50. More details in The Edge FinancialDaily.
O&G stocks could see trading interest as Petronas said it would focus on domestic in terms exploration. It has allocated US$2 billion over three years for local exploration which is higher than US$1.2 billion previously.
Kencana’s two units have secured two contracts worth RM30.7 million. The first contract was from Newfield Peninsula Malaysia Inc. to build the jackets for wellhead platform and central processing platform for PM329 East Piatu Development Project off Peninsular Malaysia. The contract is valued at RM21.6 million.
MMC Corp submitted a preliminary proposal to the government for the acquisition of UEM Group Bhd and has not received any indication on the proposal as yet.
“MMC will lead a consortium for the proposed acquisition and to-date, we have not approached Employees Provident Fund and/or Permodalan Nasional Bhd to be our partners,” it said.
Primus (Malaysia) Sdn Bhd has filed an originating summons with the High Court of Malaya at Kuala Lumpur over the EON Capital Bhd EGM on Sept 27.
Primus had on Monday sought to have the motion for an adjournment of the EGM as “a valid motion”.
It also sought to have a declaration that act of the chairman of the EGM in refusing to put the motion for an adjournment of the EGM to a vote was unlawful and also sought “… a declaration that the motion for the removal of the chairman of the EGM is a valid motion,” it said.
Primus said the chairman’s refusal to put to vote the motion for adjournment properly and validly moved by a shareholder at the EGM infringed the fundamental proprietary right of the shareholders, including that of the plaintiff, and was contrary to the Articles of Association of the Company.
On Wall Street, U.S. stocks fell in light trading on Monday as investors took profits on recent gains, using middling economic data and worries about euro zone debt as a catalyst for shedding long positions.
The Dow Jones industrial average fell 78.41 points, or 0.72 percent, at 10,751.27. The Standard & Poor's 500 Index lost 9.21 points, or 0.80 percent, at 1,137.03. The Nasdaq Composite Index dropped 26.23 points, or 1.11 percent, at 2,344.52.
Stocks to watch are MGRC, DIGI.COM BHD [], oil and gas (O&G) related companies including Kencana Petroleum Bhd, MMC Corp Bhd and EON CAPITAL BHD [].
MCRC, which focuses on contract genomics services, raised RM18.47 million for its initial public offering at RM1.08 apiece. MGRC announced on Monday it received the approval to implement two genome sequencing and analysis projects from the Malaysian Government. MGRC intends to accept the allocated RM5.97 million, being the first of two tranches
DiGi could stage a rebound after unusual market transactions, in the last 10 minutes of trade, pushed the FBM KLCI into the red. This could raise concerns among market participants over such action which could “destabilise” the market. Market concerns were whether the late sell-off was to impact the KLCI futures.
DiGi closed down RM3.58 to RM21 with 161,000 shares done in the absence of any negative news. This saw RM2.78 billion erased from its market capitalisation to end the day at RM16.327 billion.
The FBM KLCI, which was trading around the 1,470 level throughout the day, fell 4.05 points to close at 1,462.27. The KLCI futures fell 8.5 points to 1,464.50. More details in The Edge FinancialDaily.
O&G stocks could see trading interest as Petronas said it would focus on domestic in terms exploration. It has allocated US$2 billion over three years for local exploration which is higher than US$1.2 billion previously.
Kencana’s two units have secured two contracts worth RM30.7 million. The first contract was from Newfield Peninsula Malaysia Inc. to build the jackets for wellhead platform and central processing platform for PM329 East Piatu Development Project off Peninsular Malaysia. The contract is valued at RM21.6 million.
MMC Corp submitted a preliminary proposal to the government for the acquisition of UEM Group Bhd and has not received any indication on the proposal as yet.
“MMC will lead a consortium for the proposed acquisition and to-date, we have not approached Employees Provident Fund and/or Permodalan Nasional Bhd to be our partners,” it said.
Primus (Malaysia) Sdn Bhd has filed an originating summons with the High Court of Malaya at Kuala Lumpur over the EON Capital Bhd EGM on Sept 27.
Primus had on Monday sought to have the motion for an adjournment of the EGM as “a valid motion”.
It also sought to have a declaration that act of the chairman of the EGM in refusing to put the motion for an adjournment of the EGM to a vote was unlawful and also sought “… a declaration that the motion for the removal of the chairman of the EGM is a valid motion,” it said.
Primus said the chairman’s refusal to put to vote the motion for adjournment properly and validly moved by a shareholder at the EGM infringed the fundamental proprietary right of the shareholders, including that of the plaintiff, and was contrary to the Articles of Association of the Company.
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