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 MAYBULK 5077 MALAYSIAN BULK CARRIERS BERHAD in the spotlight

AT the end of last month, tycoon Robert Kuok Hock Nien was in the news twice. This is novel, considering that the billionaire — Malaysia’s richest individual with an estimated net worth of US$11.6 billion (RM50.7 billion) by Forbes magazine — is very low key.

On April 29, the government announced the approval of five digital bank licences, one of which was issued to a consortium led by GXS Bank Pte Ltd and Kuok Brothers Sdn Bhd — the tycoon’s privately held holding company.

Just as Kuok’s planned foray into digital banking was highlighted, another corporate exercise was announced that evening. Pacific Carriers Ltd, which the tycoon controls, sold a block of shares representing a 32% stake in Malaysian Bulk Carriers Bhd (Maybulk) to Datuk Goh Cheng Huat and Tunas Capital Sdn Bhd, with the shares split equally between the two.

The question now is, will Kuok exit Maybulk entirely, or will his flagship PPB Group Bhd maintain its 14% shareholding in the shipping company?

While there is little to go on, a contact who is familiar with Kuok says it is unlikely that the tycoon will keep his remaining interest in Maybulk. “A person of Kuok’s stature and standing is unlikely to hold 14% or 16% [including Pacific Carriers Ltd’s remaining 2% stake] in a company. He will most probably exit, I think.”

According to Bloomberg, the block of shares crossed for RM160 million, or 50 sen per share — a 4.5 sen discount to Maybulk’s closing price on the day the shareholding change was announced.

When asked about the discount to the market price, the contact says the reason could be because it was a non-controlling block and that Kuok still held 16% equity interest in Maybulk, or equal to the stake of each of the new shareholders. “Anyway, it’s not like Kuok needs the money,” he adds.

The tycoon, who will turn 99 in October, has topped Malaysia’s richest list for decades. In 1997, he was dubbed the “world’s shrewdest businessman” by Forbes magazine.

The 50 sen price tag is a 7.37% premium to Maybulk’s net asset per share of 46.66 sen as at end-December last year.

The company made a net profit of RM192.53 million in its latest financial year ended Dec 31, from a revenue of RM207.04 million — a turnaround from FY2020, when it suffered a net loss of RM20.78 million on the back of RM175.99 million in turnover.

Maybulk says the better showing in FY2021 was “mainly due to the increase in operating profit, as well as non-recurring items of gain on disposal of property, plant and equipment, reversal of vessel impairments and the gain on the de-recognition of a joint venture”.

The company’s operating profit for FY2021 stood at RM93.01 million, compared with the operating loss of RM3.59 million in FY2020, largely brought about by a 111% jump in charter rates to US$18,092 per day in FY2021 from US$8,566 per day in FY2020.

In FY2021, Maybulk completed the disposal of a Handysize vessel, MV Alam Sejahtera, and two Supramax vessels — MV Alam Molek and MV Alam Madu — with total net proceeds of RM269.938 million. This resulted in a total gain on disposal of RM98.01 million for the year and reversed an impairment loss of RM14.83 million, which boosted the company’s bottom line.

Maybulk wrapped up FY2021 with cash and bank balances of RM189.17 million and short-term deposits of RM18 million. On the other side of the balance sheet, its long-term debt commitments stood at RM59.01 million, with short-term borrowings amounting to RM6.8 million. The company also reported retained earnings of RM8.59 million, in contrast to accumulated losses of RM183.94 million in FY2020.

The businessmen buying into Maybulk are certainly not in the same league as Kuok and what their plans are for the company remains to be seen.

Goh is a 57.34% shareholder and an executive director of Eonmetall Group Bhd. He also has 50.92% equity interest in Leader Steel Bhd, where he is deputy chairman and executive director. Both companies are relatively small, with Eonmetall having a market capitalisation of RM93.06 million (its share price closed at 46 sen last Thursday) and Leader Steel, a market value of RM84.2 million (closing price of 64 sen last Thursday).

In contrast, Maybulk’s market capitalisation stood at RM540 million, with its share price closing at 54 sen on that day.

Tunas Capital is equally controlled by Pahang-based businessmen Datuk Chin Yoke Choon and Datuk Chin Yoke Kan, who may be brothers. Tunas Capital is the holding company of Kuantan-based Tunas Manja Development & Construction Sdn Bhd and Pembinaan Asmegah, which undertook the upmarket Amberhill development in Taman Melawati some years back.

Can the new shareholders — Goh and the Chins — run Maybulk? And will the company remain a shipping entity?

It should be noted that Maybulk has been disposing of its vessels and is now left with only five bulk carriers, which are used to transport dry bulk goods such as iron ore, grain and coal. Of the five, two — Alam Suria and Alam Sayang — are on long-term charters while Alam Kukuh, which was built in 2019, has been committed for sale. The company has also sold all of its tankers.

The latest shareholding developments could herald changes on Maybulk’s board, as executive director Tho Leong Chye and CEO Hor Weng Yew are linked to Pacific Carriers. Maybulk’s independent non-executive chairman Datuk Mohd Zafer Mohd Hashim is the former president and managing director of Bank Pembangunan Malaysia Bhd, which ceased to be a substantial shareholder of the company in May last year.
Kuok’s declining presence in Malaysia

While Kuok Brothers, as part of a consortium, may have secured a digital banking licence in Malaysia, the billionaire’s presence in the country has been on the decline, based on his business interests here. If PPB Group sells or reduces its shareholding in Maybulk, his interest in the country’s publicly traded domain will be further reduced.

Kuok’s flagship PPB Group (formerly Perlis Plantations Bhd) and Shangri-La Hotels (Malaysia) Bhd are the only two publicly traded companies remaining apart from Maybulk, after several others were sold or privatised.

It is noteworthy that Shangri-La Hotels Malaysia only has a few assets. In Kuala Lumpur, it owns the Shangri-La Hotel in Jalan Sultan Ismail, as well as the adjacent UBN Tower and apartments. In Penang, it owns Hotel Jen in George Town, as well as the Golden Sands Resort and Shangri-La Rasa Sayang Resort & Spa in Batu Ferringhi Beach. In Sabah, it owns the Shangri-La Rasa Ria Resort & Spa and the Dalit Bay Golf & Country Club in Tuaran.

In contrast, Shangri-La Asia Ltd, which is listed on Hong Kong’s Hang Seng Index and holds a 52.78% stake in Shangri-La Hotels Malaysia, owns more than 100 hotels in 22 countries, including 56 hotels in China.

Kuok’s investments in China date back to the 1980s. Among his assets are companies that operate huge businesses such as the bottling of Coca-Cola and the manufacturing of cooking oil (under agribusiness giant Wilmar International Ltd, which is listed in Singapore and in which Kuok’s PPB has 18.3% equity interest).

In a nutshell, Malaysia and the hotel operations in the country are unlikely to be significant to Kuok. Over the past 20 years or so, many of his companies have been privatised or sold, and there have been no large initial public offerings or acquisitions since Maybulk’s listing in December 2003 (see chart on Kuok’s assets in Malaysia).

Jerneh Asia Bhd was delisted from Bursa Malaysia at end-January 2012, after the insurance outfit sold its 80% equity interest in Jerneh Insurance Bhd to ACE INA International Holdings Ltd in December 2010 for RM523.2 million cash, and was privatised by Kuok. The billionaire and persons acting in concert with him controlled 41.81% of Jerneh Asia and forked out RM207.19 million or RM1.45 per share, as well as 45 sen per warrant, to privatise the insurer.

Jerneh Asia was responsible for providing insurance services to most of Kuok’s interests. In the same way, Maybulk and Pacific Carriers are the shipping arms of his vast business empire.

In 2009, PPB sold its wholly-owned Malayan Sugar Manufacturing Co Bhd (now publicly traded as MSM Malaysia Holdings Bhd) to the Federal Land Development Authority-controlled FGV Holdings Bhd for RM1.22 billion cash, and hived off its sugarcane cultivation farm in Chuping, Perlis, for RM45 million. It also sold a 50% stake in Kilang Gula Felda Perlis Sdn Bhd for RM26.3 million and disposed of its 20% equity interest in plantation company Tradewinds (M) Bhd — which controlled Central Sugar Refinery, the other sugar facility in Malaysia — to FGV.

The move to sell his sugar businesses in Malaysia came as a surprise at the time, as Kuok was known as the “Sugar King of Asia” or “Tong Wong” in Cantonese, having controlled 10% of the world’s sugar production at one time. He had major sugarcane plantations and refining businesses in Asia, including in the Philippines, Thailand and Indonesia, so his exit from the sugar business in Malaysia was perplexing.

While certain quarters say Kuok was forced out of the sugar business in Malaysia, others doubt the story, saying that his ties with the Malaysian government has always been strong. Some of his business manoeuvres, however, may have irked some of those in the corridors of power.

For instance, in June 2007, PPB divested its 55.6% stake in Bursa-listed PPB Oil Palms Bhd, PGEO Group Sdn Bhd and Kuok Oils and Grains Pte Ltd to Wilmar for an 18.3% stake in the Singapore-listed company. Wilmar is controlled by the billionaire’s nephew, its chairman and CEO Kuok Khoon Huong, who has a 12.83% stake in the agribusiness giant.

Many viewed this move as the start of Kuok’s exit from Malaysia.

Other notable privatisations by Kuok and PPB include that of FFM Bhd (Federal Flour Mills) in mid-October 2004, when it was delisted from the local bourse after PPB acquired the remaining equity interest of 45.77% by issuing 102.13 million new PPB shares and paying RM204.25 million cash. The deal gave FFM shareholders one PPB share and RM2 in cash for every share they held.

While there have been instances where Kuok acquired assets in Malaysia — such as the 12.5-acre seafront tract in Iskandar Malaysia, Johor, for RM182 million, having partnered with Khazanah Nasional Bhd on a 70:30 basis in April 2013 — the bulk of his business interests is understandably overseas.

So, what is in store for Maybulk and its minority shareholders?

http://www.theedgemarkets.com/article/maybulk-spotlight

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