Announcement sends MMC shares up 4 sen to RM1.41
By PAULINE NG
IN KUALA LUMPUR
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MALAYSIAN conglomerate MMC Corporation says that it has no plans at present to take its listed associate Zelan private, after a shareholder tussle that sidelined Zelan founder Albert Chang Si Fock.
Shares of Zelan, previously called Tronoh Consolidated, have been falling since May. But the slide has accelerated since the company said last week that Mr Chang's contract as CEO, which expires at end-January next year, will be allowed to lapse.
Over the past months, Mr Chang has been gradually reducing his stake in Zelan, a design-and-build power plant that has overseas footholds in India and Indonesia.
Mr Chang, 53, is now deemed to be holding about 9.5 per cent of the company through corporations controlled by him. The reasons for his departure are unclear, but the market is worried that it comes at such a challenging point in the economic cycle.
MMC is the flagship of tycoon Syed Mokhtar Al-Bukhary. Its unit Tronoh owns almost 40 per cent of Zelan but has allowed Mr Chang and his associates to continue managing the company.
MMC, which has interests in power, ports, transport and logistics, has not said why Mr Chang's contract will not be renewed.
The steep fall in Zelan's share price from a 52-week high of RM6.10 to about 78.5 sen has given rise to speculation that MMC wants to take the company private.
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But MMC has a lot on its plate - such as a pending RM2.2 billion (S$925 million) deal to buy all the equity in privately held Senai Airport Terminal Services and listed water play Aliran Ihsan Resources as part of plans 'to accelerate its expansion drive in the logistics and utilities businesses'.
With a net debt to equity of about 1.7 times, MMC is not in a position to take on even more debt. And its announcement that it is does not plan a move on Zelan 'currently' saw its shares rebound four sen to RM1.41 yesterday.
An analyst estimated that it would cost RM274 million at current prices to take Zelan private, or RM343 million, assuming a 25 per cent premium. But at current prices, the counter's yield of more than 10 per cent would likely be a disincentive for minorities to sell.
MMC said that it is 'committed to work with Zelan to strengthen its financial standing and future prospects'.
2 comments:
There are credible speculation amongst the baners in town that MMC is being used as a vehicle by its majority shareholder Tan Sri Syed Mokhtar to oust Albert Chang from Zelan. The people in MMC are merely puppets to thier masters. Tan Sri Syd Mokhtar is in deep financial trouble and needs liquidity fast. Zelan has IJM shares and a pile of cash in its coffers. No reason not to renew Albert's contract considering Zelan has been making profits year in year out.
I have also been hearing a lot of rumours on a tussle between Syed Mokhtar & Albert (CEO of Zelan). Off course now we know Albert lost-out. But I think the bigger losser will be Zelan, the company itself. From sources, Syed Mokhtar is well known for stripping good company assets for personal gains. It will be a real pitty if this happends to Zelan.
I have been tracking Zelan and know that the company has plenty of overseas projects, strong balance sheet and future plan of acquiring/managing power plants for stable recurring income. Based on the latest annual report, the company & subsidiaries has low debt-to-equity ratio which is vital at times like these especially for a construction group!
Also, the group has achieved reasonably good return-on-equity even at a low leverage. To me, this means that the group is convincingly well managed by Albert and his team. All these are important elements if you’re looking for tomorrow’s winner.
However, with the change in top management, I am cashing out already as I suspect the new m,anagement will be heavily influence by Syed Mokhtar's directions. Just look at MMC's management, all working for their master. Does not make business sense for MMC to buy Senai Airport land and Aliran Ehsan for RM1.7billion in cash whereby MMC will sell its stake in PTP port to finance the transaction. Why sell good recuring income assets to go after assets which take years to realise gains. Further, from sources, the vendors for Senai Land & Aliran Ehsam shares are related to Syed Mokhtar too. So who benefit if the transaction goes ahead? SM lah!
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