E&O/Sime Darby
What’s NEXT! … dated Oct 2012
The corporate governance issues in relation to the deal continue to simmer.
The transaction was highlighted in CLSA’s CG Watch 2012 report saying the reputation of the SC was hurt due to its handling of the Sime Darby-E&O deal. According to the report, the SC suffered an image issue when it ruled that Sime Darby was not required to make a GO for the remaining 70% stake in E&O.
The report adds that the SC’s reputation was also tarnished because E&O chairman Datuk Azizan Abdul Rahman had raised his personal stake in the developer just before the acquisition.
The SC ruled that it found no evidence Azizan knew about the deal before his purchase and cleared him of any wrongdoing. While this may have been the correct decision, it did hurt the SC’s reputation in the market and raised allegations … about the politically well connected receiving special treatment.
The SC’s ruling on the Sime Darby-E&O transaction is being challenged by a minority shareholder on the property developer.
In late Sept 2012 the Court of Appeal has rejected the SC appeal for the recusal of High Court Judge Abang Iskandar from hearing the case brought by a minority shareholder of E&O against the regulator.
A point of contention in Chow’s case is that the SC task force examining the deal found that Sime Darby was obliged to make a MGO. However, the task force’s finding was later superdeded by SC’s top authority in a major decision.
In the CG report, CLSA opines that Sime Darby may eventually undertake a GO voluntarily to ensure better control and reap synergistic benefits for a merged property decision.
A voluntarily MGO is certainly one way to resolve this whole corporate governance issue. However Sime Darby has not indicated that it plans to do so.
Sime Darby does not need to make an offer price of rm2.30 as the six month period prescribed under the Malaysian Code on Takeovers and Mergers 2010 has elapsed.
Sime Darby could make an offer of rm2.00 which is roughly a 20% premium to the current market price of rm1.70. While this is a fair premium for an MGO, some say it is only fair that they make the same offer of rm2.30.
As the court hearings were going on, it was reported in late Sept 2012 that Tham may exit E&O. But E&O has said that Tham was no plans to retire. After selling a 12% stake to Sime Darby, Tham still holds 5.2% in E&O.
Speculation over Tham exiting is nothing new. In fact, there was heavy speculation before the deal was done that Tham was looking to leave. This was the reason why many bought into E&O as they expected a privatization offer.
Be as it may, some still expect Sime Darby to eventually increase its stake in E&O. The Penang based developer is looking to launch rm2.5 billion worth of properties in Iskandar Malaysia,Penang. KlangValley and London over the next 18 months from Oct 2012.
An increased stake in E&O will provide Sime Darby with better control. But this may not be in the latter’s plans as yet. Sime Darby has reiterated that it does not intend to increase its stake. It is comfortable with the current (Oct 2012) shareholdings as it wants to learn from E&O with expertise in high end condominiums.
However, there have been no material developments of a JV project between Sime Darby and E&O since the deal was inked in 2011. When asked, Sime Darby told MSWG that they are exploring potential projects.
It was hoping that Sime Darby would have some prime land in KL for E&O to work on. But Sime Darby said that it is not so. This is surprising for a group with such a huge landbank.
It is this disquiet that continues to drive expectations of a GO.
While the CG’s issues remain a thorn in both the SC’s and Sime Darby’s side, no rules were broken. SIme Darby did not cross the 33% threshold and there was evidence of collusion between the shareholders. It remains to be seen how the issue is resolved. At least one positive thing that come out of it is that other companies have not followed suit unit the decision on the case is firmed up.
Perisai
What’s Up? … dated Oct 2012
Market talk was that Perisai might announce two rig contracts very soon. The first acquisition could be a stake in Emas Offshore's (EOC) floating, production, storage and offloading (FPSO) vessel. In return, Perisai could either issue shares or raise capital through a rights issue (rumoured to be priced at RM1.20).
EOC, which is 46.5%-owned by Ezra, was reported to have received a Letter Of Intent (LOI) to supply and operate a FPSO vessel to HESS for the Kamelia gas field.
EOC still needs to meet strict domestic content requirements for offshore projects, and it could be salvaged through Perisai's 40%-owned Larizz Petroleum which is licensed to bid for local contracts.
Estimate shows that securing a 50% stake in the US$300mil FPSO vessel is expected to raise Perisai's fair value by RM300mil or 53 sen a share, assuming a project internal rate of return (IRR) of 15%, and enhance its earnings by RM38mil per annum.
Meanwhile, the market is speculating a second asset acquisition but the value is unknown at this juncture. Regardless this will also serve a catalyst to re-rate the stock.
There is also potential value accretion from the newly-ordered drilling rig as there will be more upside potential once this asset is contracted out.
PetGas/PetDag
What’s Up? … dated Oct 2012
PKR official said if the opposition coalition is voted into power in the coming 13th GE, the new federal government will review the economic needs of the massive rm50 billion RAPID in Pengerang, Johor.
The coalition will have to study the working paper of the project, and made it available for public scrutiny before they decide on the projects. Principally, the coalition have several options with regards to the project, of which one of the them is to move it to Kerteh, when the facilities for such a massive industrial development is readily available.
The options on the table include to scrap the project altogether.
Mudajaya
What’s NEXT! … dated Oct 2012
Construction firm Mudajaya Group Bhd's outlook may be perking up with worries over fuel supply in Indiato recede with the impending signing of a fuel supply agreement (FSA) and the award of Mass Rapid Transit (MRT) projects.
The company might also be a key beneficiary in other developments given its track record in highway and power plant projects.
Mudajaya will be constructing the MRT viaduct guideway and other associated works from Dataran Sunway to Section 17, and this is expected to be completed in 2016.
On the much delayed FSA, newsflow appears to signal that a new coal-supply structure could be firmed up after Coal India's board meeting at end-October with November 2012 being the next timeline for the potential signing of the FSA between incoming power producers and Coal India.
With the near conclusion of the price-pooling mechanism for coal prices and penalty structure for Coal India, there was a good chance the FSA would be eventually signed.
Mudajaya was forming a consortium with an international player to participate in the prequalification of a 1,300MW gas-fired co-generation power plant for Petronas' Rapid project in Pengerang.
Scomi Grp/IJM Corp
Tan Sri Abu Sahid who emerged as a substantial shareholder in Scomi Grp has declared
that the is not interested in taking control of the company, nor he is opposed to the entry of construction giant IJM Corp into Scomi. He does not seek a board seat or representation and that his acquisition was merely as an investor.
Currently (01 Oct 2012), Abu Sahid holds 8.75% stake and an associate of his, Datuk Siew has 5.61% stake in Scomi Grp. Many viewed their entry as a threat to controlling shareholder Shah Hakim who has about 14.87% stake in Scomi Grp. Hakim’s partner is DAtuk Kamaluddin Abdullah, son of former prime minister Tun Abduallah.
It is not known if Abu Sahid or parties linked to him have accumulated more shares of warrants. It is clear that someone has been accumulating them. The conversion is 40 sen.
If market talks are to be believed, Scomi is also likely to secure a risk service contracts for marginal oil fields, partnering Australia’s Cue Energy Resources Ltd. Scomi and Cye Energy are understood to have bid for two fields off the coast of Peninsula Malaysia. An announcement on the award could come as early as early Oct 2012.
No comments:
Post a Comment