Asas Serba’s last breath?

They say, a man’s last moments before his execution would drive him to savour the things he loves most, hence the last meal granted to the condemned is almost always a meal that most would consider grand.

In recent weeks, MMC has come out in the open to own up to having submitted a proposal to the Government, in particular Khazanah, of its interest in acquiring PLUS, through UEM.

Asas Serba must be credited if the deal comes through, but as the public outrage of both proposals hit cyberspace, and with Parliament sitting resuming today, the Rakyat can rest assured that neither MMC nor Asas Serba will hijack their interest.

So in a last puch, Asas Serba convinced the editor of Malaysian Reserve to publish this.

In fact, Business Times of Singapore probably made the most sense of the entire episode with their story ‘, so reprinted below is The Malaysian Reserve Story (Pro Asas Serba?) and then the Singapore Business Time’s Piece….You make up your own mind!!

THE MALAYSIAN RESERVE

Company hopes government will consider its proposal before deciding on MMC’s bid for UEM
by BHUPINDER SINGH

ASAS Serba Sdn Bhd hopes to have the opportunity to make a formal presentation to the government on its proposed takeover of highways before a decision is made on the bid for UEM Group Bhd by the MMC Corp Bhd-led consortium.

Asas Serba chairman and shareholder Datuk Syed Amin Aljeffri said it has yet to be called to do so despite the company having submitted its proposal in May 2009 to take over and privatise all the countrys 23 toll road concessions for about RM50 billion.

“We hope to be given the chance to present our proposal as we believe our proposal to cut toll rates by 20% and not increase toll rates has elements of public benefit,” Syed Amin told The Malaysian Reserve last week.

Asked on the possibility that Asas Serba would be prepared to bid for the remaining toll concessions if UEM, with its crown jewel PLUS Expressways Bhd, is sold to the MMC consortium, Syed Amin said Asas Serba would be prepared to review its bid for the remaining toll concessions.

Success or failure of the two offers could signal the approach the government is set to take on future divestment exercise of its assets.

The Asas Serba bid is from individuals while the MMC consortium offer is institutionally backed, reportedly, by the Employees Provident Fund Board and Permodalan Nasional Bhd.

When the Asas Serba offer became public last year, sovereign wealth fund, Khazanah Nasional Bhd which owned the UEM Group, played down talk of selling PLUS Expressway, as the toll concession was seen by Khazanah as a core business that provided steady cash flow.

The bid by billionaire, Tan Sri Syed Mokhtar AlBukhary, through MMC-led consortium to take over UEM for about RM15.6 billion, suggests that Khazanah’s management is now prepared to listen to offers for the toll concession as well.

UEM is said to have plans to divest its IT and telecommunications business under the Time Engineering Bhd stable as well as Cement Industries of Malaysia Bhd.

The group recently sold its pharmaceutical interest under Pharmaniaga Bhd to Boustead Holdings Bhd, which is controlled by Lembaga Tabung Angkatan Tentera. 

MALAYSIA INSIGHT (Singapore Business Times)
Good and bad takeover proposals

EPF’s purported plan to buy PLUS Expressways makes economic sense, while MMC’s bid for UEM does not

By S JAYASANKARAN
KL CORRESPONDENT

MMC Corporation has submitted a bid to buy the UEM Group from Khazanah Nasional together with state-owned trust agency Permodalan Nasional (PNB) and pension fund, the Employees Provident Fund (EPF).

It is a very bad idea not least because MMC Corp, by its own admission, didn’t even bother asking PNB and the EPF whether they were interested.

Moreover, MMC said it intended to lead the consortium (40 per cent) with its partners carrying 30 per cent each when the other two parties have far stronger balance sheets. UEM is a massive conglomerate which owns, among others, PLUS Expressways and almost a quarter of Johor through its ownership of land in the Iskandar region.

On a simple point of regionalism, what do you think the people of Johor are going to feel about that? Syed Mokhtar Al-Bukhary, the tycoon behind MMC Corp, hails from the northern Kedah state.

More importantly, it is a risky proposition. MMC Corp shoulders a massive debt burden. As at end-June, MMC’s net gearing stood at 271.7 per cent. Its effective finance cost is around 6.6 per cent versus PLUS’s indicative dividend yield of 4.2 per cent. Where is the sense in that?

The proposed buy does not bring any value to the table. There are no jobs created and one would question whether MMC has the financial heft to continue developing the mammoth Iskandar project.

On Saturday, the Edge financial weekly cited sources saying that the EPF, by itself, had submitted a proposal to the government asking to be allowed to buy not UEM but PLUS Expressways, which owns and manages the North-South Highway that bisects the length of Peninsular Malaysia.

Now that is a different proposition altogether. If PLUS has to be sold then the EPF is the government’s best bet.

Simply put, the pension fund which is a mandatory savings plan for every single private sector employee in Malaysia has too much money and not enough places to put it.

It has over RM400 billion (S$171 billion) and that sum is growing by at least RM1.5 billion a month. In short, it is a no-risk proposition.

What it is obligated to do by law, however, is to pay out at least 2-3 per cent a year back to contributors. But the fund used to pay out 8 per cent in the 1980s and 1990s and around 5 per cent in recent years.

To do that, the pension fund needs assets generating at least 6 per cent a year.

PLUS is the answer. It is a mature asset with consistently improving traffic volumes. It also pays out handsome dividends every year, which is why analysts routinely describe it as a ‘dividend play’. In addition, it still has around RM5 billion in tax credits which makes for quite a lot of tax-exempt dividends.

According to the Edge, the pension fund is looking to offer between RM4.40 and RM4.60 a PLUS share to take the highway operator private. The fund already owns almost 13 per cent of PLUS.

If the pension fund does take PLUS private at RM4.60 a share, it would cost it around RM23 billion. Coupled with PLUS’s debt of over RM8 billion, that’s RM31 billion.

But PLUS generates around RM2 billion in cash flows every year. That’s more than a 6 per cent return a year.

The math works out. Khazanah will get over RM12 billion for its pains and the government will be relieved of a major political headache – the steadily rising toll fares on the North-South highways that are guaranteed by its concession agreement.

The EPF has also guaranteed not to hike toll fares until the end of the concession period.

Sounds like a no-brainer doesn’t it? 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 





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