About POS,Proton,MMC/Malakoff,HB capital,PLUS,Yee Lee/Spritzer

POS

Khazanah Nasional Bhd has set in motion its plan to divest its 32.21% stake in POS. Sources say on 20 Aug 2010 was the deadline for bidders to submit the proposals in a pre qualification exercise called by CIMB.

Sources say the exercise attracted many parties. The leading candidate is a JV by Ekuiti Nasional Bhd and CVC Capital Partners, a private equity fund headquarters in Luxembourg with a network of 20 offices across Europe, Asia and the US.

CVC Capital currently has stakes in Magnum Corp Bhd, Genting group’s paper and packaging business.

The other notable names that have cropped up are Sapura Group and Scomi Marine Bhd, Knosortium Logistic Bhd have also put in a bid.


Proton

What’s Up? … dated Aug 2010

Sources say Lotus Group Intl Ltd, a subsidiary of Proton Holdings Bhd will require cash injection of close to RM500 million over the next two years to develop a new models before it can repay all amounts due to the parent.

It is learnt that on top of the cash injection. Proton’s management also plans to issue new shares in Lotus to investors in an exercise that will bring close to RM420 million into the loss making UK automotive and engineering consultancy company.

The new shareholders will hold about 20% of Lotus. According to plan, the subscription of new shares will be done over two years. Meaning the cash will come in stages.

The identity of the new investors is not known as yet but all indications are that a stake will be offered to the present Lotus management.

Speculation of Proton selling a stake in Lotus has been going around for several months now, but the response of the Proton board to the talk has been mixed. In June 2010, the board issued statement denying that Lotus was up for sale at that point. However Proton chairman Datuk Mohd Nadzmi had, around the same time, alluded that the company was contemplating selling a stake to the management of Lotus as an incentive.

Sources say the entire exercise to revitalize Lotus with additional cash and the sale of an equity stake is part of a grand five years plan for Proton to recover its advances to Lotus that have been mounting over the years.

It is learnt that the amount advanced to Lotus over the past year has increased and has now risen to more than RM280 million,

The advances were from both Proton and subsidiaries of Proton that have business dealings with Lotus. It is not certain if the advances were agreed to by all board members.

The sale of an equity stake in Lotus and the advanced by Proton as a shareholders’ loan are crucial in the recovery of Lotus and for Proton to recover the money it has advanced so far to the UK subsidiaries. Without new loans to Lotus , the chances of Proton recovering its advances to the company are quite tough as Lotus has been loss making.

Based on Proton’s annual report for FY2009 ending March, the amount advanced to subsidiaries at the company level was RM177.9 million. It cannot be determined if the amount wert to Lotus or other subsidiaries of Proton.

However, an inkling that a portion of the advances has gone to Lotus can be gleaned from its 2009 annual report which states that the interest income from the UK company amounted to RM5.7 million.

Sources say the question of whether the advances to Lotus can be recovered and how Proton plans to extract value from the UK subsidiary are among the reasons behind the resignation of two members of the board.


MMC Corp/Malakoff

What’s Up? … dated Aug 2010

Speculation that the re-listing of Malakoff could take place sooner that expected? Sources say Malakoff has already started to lay the preliminary groundwork for a re-listing, but details remain sketchy at this stage.

Malakoff has only been delisted for three years. And the company has provided a steady earnings driver for MMC, its highly geared balance sheet has always been a concern, even before Malakoff was taken private.

Malakoff is caught in a position now where the company is unable to grow due to its leveraged position. Although most of its loans are on a project financing basis, it has proved difficult for the company to go out and expand.

Another point that should be mentioned is Malakoff’s position as the owner of a coal fired plant. It has already been made clear by the government that coal fired plant will form the keystone of Malaysia’s power generation mix from 2015. As one of the only three owners of coal fired plants, it makes Malakoff that much more valuable.

Ultimately, the question will be how much will Malakoff be worth at relisting? When the company was taken private three years ago, it was done for RM9.4 billion, with shareholders getting RM10.35 per share. At the time, Malakoff’s paid up capital was RM899 million.

Now under the umbrella of MMC, energy and utilities comprise 84% of the group’s overall revenue and 90.8% of profit as at end March 2010.


RHB Capital

What’s Up? … dated Aug 2010

Sources say the EPF has set in motion a plan to sell down its interest in RHB Capital. In this regard, the fund has invited proposals from foreign and local investment banks in a bid to find potential investors.

In June 2010, EPF CEO Tan Sri Azlan said that the provident fund aims to reduce its stake in RHB Capital to 40% by the middle of 2011.

The EPF has been disposing of its RHB Capital shares on the open market. As at July 15 2010, it had pared down its shareholding in the banking group from 57.24% at beginning of 2010 to 54.91%.

To recap, after the EPF’s takeover of RHB Capital in March 2007 at RM4.90 a share, the provident fund had until June 2008 to reduce its holdings to 35% from 82%.

In line with its plan to cut down its stake, the EPF sold a 25% stake in RHB capital to ADCB at RM7.20 a share in May 2008. It still had 57% - some 22% more than the 35% that it was supposed to pare down to. The EPF then managed to get an extension until June 2011 to reduce its interest in RHB Capital.

For FY2010 ended March 31 RHB Capital’s shareholders’ funds stood at RM9.2 billion. Based on share price of RM6.63, the company is trading at a price to book value of 1.5 times. Net asset per share stood at RM4.27.

The industry average is about 1.8 times which translates to about RM7.70 per RHB Capital share.

Will the EPF offer its stake to another party at the same valuation as it did to ADCB? And if the price is right, will ADCB sell some of its investment in RHB capital as well?

Pricing aside, the emergence of another major shareholder is an interesting prospects for RHB Capital. Will the new investor be a local or foreign party? Will it be related to a financial institution or be just an investor?


PLUS

What’s Up? … dated Aug 2010

Tan Sri Syed Mokhtar’s bid to take over PLUS and other highway concessions seems to have made some progress.

While senior officials demy that a formal proposal has been received, sources aligned to Syed Mokhtar say a preliminary proposal has reached PLUS. The proposal was touched on during a recent PLUS board meeting.

Syed Mokhtar’s vehicle reportedly submit its bids to the Economic Planning Unit in June 2010.

Sources say Mokhtar’s company is offering to buy over all toll highways for RM45 billion and cut toll rates by 10%. It sweetened the deal by promising not to hike toll rates.

However, industry observers say the government is unlikely to privatize PLUS as it is key stock in Bursa. It provides sizeable exposure to Malaysian tolled roads and is among the top 10 toll road operators by market cap.


Yee Lee/Spritzer

What’s Up? … dated Aug 2010

Yee Lee Corp has a 28.14% stake in Spritzer while Yee Lee Holdings Sdn Bhd has 14.05% and with additional 4.2%, the group will have a total equity interest of 46.39%.

It has raised eyebrows because Yee Lee Corp’s direct interest is now close to 33% threshold level.

Does this mean that a corporate exercise between Yee Lee Corp and Spritzer is in the works?