Friday 11 January 2013

JIT News - CIMB, IRCB, DRBHicom, IJM Corp/KEuro ...


CIMB: Valuations for CIMB Group Bhd’s life insurance and takaful business may have declined significantly compared to stake since 2007 if its is true that it is being sold at 2.2 times price to book value. It was reported that Sunlife Financial and Khazanah Nasional Bhd are in talks to purchase CIMB’s remaining 51% stake in its life insurance and takaful arm that could fetch a book value of 2.2 times pricing CIMB Aviva Assurance at rm1 billion. This indicates that valuations for its life insurance business may have fallen by more than half since 2007 when CIMB disposed of a 49% stake in Commerce Life Assurance and Commerce Takaful for a record setting 4.6 times price to book value to Aviva Plc. Aviva paid a total of rm500 million for its stake in the life insurance and takaful business.

IRCB: It was the emergence of a new major shareholder who acquired about a tenth of the rubber glove manufacturer from major shareholders in an off market deal. The transaction coincided with board changes in the Perak based company.

Cheang Phoy Ken emerged as a substantial shareholder in IRCB in 07 Jan 2013 after he acquired 65 million shares or 10.98% stake in the company controlling shareholders who are also directors of the glovemaker. At 15 sen each, the deal was worth rm9.75 million. The sellers, who are all related, are MD and non executive directors.

The family’s stake is held via Chip Lam Seng Bhd which still owns 11.3% after the off market deal. This compares with 25.43% stake as at June 2012.

Following the off market deal, Cheang’s stake in IRCB again raised to 11.23%.

Cheang’s presence coincided with the resignation of non executive director Tan Koon Poon and Tan Loon Guan. Changes in IRCB’s board dynamics and major shareholders’ stakes come at a time when the PN17 status company is contending with weaker financials.

In Dec 2012 MBB had recalled loan facilities given to the company’s wholly owned subsidiary with immediate effect following a default on rm64.2 million worth of debt obligations. As the defaulted sum is more than 5% of the net assets of the company, BursaMalaysiaplaced MRCB under PN17 category.
IRCB said it is managing business with limited financing resources and it is in talks with two other lenders AmBank and CIMB for a stand still arrangement.

The loss making rubber glove manufacturer said it is also talking with strategic partners which may inject capital into the company. IRCB had make cumulative loss of rm18 million in the nine months ended Oct 31 2012 against a net loss of rm17.93 million a year ago.

As a t Oct 2012, its net debt stood at rm24.83 million based on its cash of rm45.08 million and debt obligations of rm70 million. IRCB does not have a formal regularization plan to rejuvenate its financials yet, said it intends to come out with one to repair its balance sheet.

It was reported in Oct 2012 that IRB might be a takeover target as larger rubber glove manufacturers expand via M&As to expedite growth.

DRBHicom: It has not been approached or notified by controlling shareholder Tan Sri Syed Mohktar of any plans to take the company private. Also it added that the listing of the Proton distribution business to unlock the values of the merged entity is one of the possible scenarios. However, it was no part of the plan to de list DRBHicom. The proposal is still at a very preliminary stage.

Market observers are not convinced of a possible privatization of DRBHicom considering that Syed Mohktar would have been able to privatize the firm at below rm2 in 2012. However others opined that the privatization makes sense because the stock is trading below its book value of rm4.06. Taking the company private essentially facilities its corporate revamp. The revamp may involve the sale of non core assets and relisting of the group’s automotive businesses which include Proton. If true it will be the catalyst to unlock immediate value.

IJM/KEuro: The WCE project will have its concession period reviewed in the 50th year and extended for another 10 if the agreed targeted return had not been met. Another point is that WCESB, KEuro’s 80% subsidiary undertaking the project, would be liable for rm100000 in liquidated and ascertained damages for each day of delay of construction if the project is not completed by the agreed completion date.

A five year construction period has been touted for the 233km highway form Banting, Selangor to Taiping, Perak estimated to cost rm6 billion. One of the terms in the concession agreement reads … If road service volume is below acceptable level, WCESB is required to carry out upgrading works at its own costs and expenses to ease traffic congestion. If WCESB fails to meet its maintenance obligations, the government would impose penalties.

Cost savings from the construction costs shall be utilized to review the GSL (government support loan) amount or for other purposes as may be determined by the government. Additionally, WCESB had in return for the GSL proposed that toll revenue in excess of an agreed traffic volume be shared on the basis of 70:30 between the government and WCESB until the full settlement of the GSL.

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