SSteel
What’s Up? … dated Sept 2010
Its MGO was not really much of a corporate exercise. Only 9.36 million of its shares equivalent to a 2.23% stake were surrendered to Signaland Sdn Bhd, a vehicle linked to Tan Sri Quek, who had made the MGO at RM2.05 per share.
Given the lukewarm response to the MGO, SSB will remain a public listed company, at least for now. The only difference is the Quek family now holds a majority stake in the steelmaker.
Currently Signland and parties acting in concert collectively own 72.49% of SSB, including a 41.46% held by Hume Industries Bhd, which was privatized by Quek via a voluntary takeover offer early 2010.
Co-founder Dr Tan who is also group MD is probably the second largest shareholder in SSB, with 7.9% stake.
The fact that the HL Group increased its sake in SSB reflected its confidence in the steelmaker’s growth potential and that it was the right time to buy the stock. The MGO came about after Signaland bought 113.38 million shares, equivalent to a 27.03% stake, in SSB from Natstell Holdings Pte Ltd for RM232.4 million cash or RM2.05 apiece.
Some quarters say Quek already has a plan for SSB in terms of operations. With the majority shareholding in hand, it would be easier for the HL Group to implement its plan.
However, SSB does not have a cash rich balance sheet. It has large short term borrowings which stood at RM747 million as of June 30, 2010, to finance its inventory, including iron ore and scarp metal, worth RM804 million. Its cash balance was about RM62 million.
It exports about 40% of its products. The company focuses on high grade wire rods that are used in tyre manufacturing as well as car suspension.
PLUS
What’s Up? … dated Sept 2010
Speculation that a corporate exercise in the offing. It is learnt that Khazanah is looking at several options to monetise the toll road concessionaire.
It is a mature asset for Khazanah and PLUS does provide steady yields. That’s why investors do not discount the possibility of Khazanah and its wholly owned unit UEM Group selling their interest in PLUS to funds looking for long term steady returns in an exercise that could happen within the next few months.
One possibility is the EPF. Sources say a likely scenario is Khazanah and UEM disposing of their entire interest in PLUS to the EPF, a move that will increase the EPF’s interest in the toll road concessionaire to more than 60% and trigger a MGO.
However, the EPF has fairly denied that it is looking to buy Khazanah’s stake in PLUS.
Meanwhile it is no secret that the company has been the acquisitions by two parties.
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.
A company linked to Tan Sri Syed Mokhtar Al-Bukhary (who also controls MMC) had supposedly submitted a proposal to the Government to buy up existing concessionaires and debts of PLUS Expressways for RM45bil with a 10% reduction in toll rates.
The other proposal came from Asas Serba Sdn Bhd, with former Renong Group top executives as its shareholders, which intended to take over the group plus its debts for RM50bil.Asas Serba promised a 20% toll rate reduction.
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.
Genting HK
Its Prospects … dated Sept 2010
Formerly known as Star Cruises, the company has been trying to recast itself as an up and coming casino play in the vein of Genting Singapore. It owns a 50% stake in Resorts World Manila *RWM), which opened in Aug 2009 and is now apparently seeing its revenues surge.
The full cost of developing RWM is said to be just US$350 million, a fraction of the S$6.5 billion that Genting Singapore spent there. Yet, when it is compared, the Manila property could dwarf what Genting Singapore has built on Sentosa in terms of tables and slot machines.
RWM has already opened the Maxim’s Hotel and will be completing the Crockfords Villas soon.
For 1H2010, Genting HK reported Ebitda of US$50.5 million. Genting HK received about S$10 million in dividends from RWM. Assuming Genting HK achieves a similar Ebitda in 2H2010, its shares are now trading at a EV/Ebitda valuation of 42.6 times. But Genting HK’s management is actually guiding for a much higher Ebitda of US$156 million for 2010, rising to US$200 million in FY2011. That would put its FY2010 and FY2011 EV/Ebitda ratios at 27.6 and 21.5 times respectively.
On the face of it, the somewhat higher valuations of Genting HK’s shares versus Genting Singapore might be justified, given that former’s possibly stronger growth potential. But shareholders of Genting HK face many more unfathomable risks than those of Genting Singapore. For one thing, RWM faces more competition. There are three other mega casinos in Manila Bay that are scheduled to start operating in 4Q2012.
Moreover, Genting HK still has very large but barely profitable cruise business. Will the company shunt this business to its parent or another company in the group as Genting Singapore did with Genting UK? Or, will it be its 50% stake in RWM that is eventually hived off elsewhere? With Genting group’s history of asset shuffling, it is impossible to tell. Interestingly the family of the late Tan Sri Lim owns a much larger proportion of Genting HK than Genting Singapore. 79.7% versus a deemed 51.7% stake in Genting Singapore through Genting Bhd.