PETALING JAYA: Aberdeen Asset Management plc has been slowly nibbling at shares of conglomerate Oriental Holdings Bhd and controls about 44.62 million shares or 7.19% equity interest in the company.
At end-March this year, the fund had about 38.1 million or 6.14% of Oriental shares. Aberdeen first surfaced as a substantial shareholder in September last year, with 31.08 million shares or 5.01% equity interest. At yesterday’s closing price of RM4.46, the block of shares it owns in Oriental is worth some RM198.99 million.
At the same time, the Employees Provident Fund (EPF) has been paring down its stake in the company.
In July 2010, EPF’s holdings in the company stood at 58.68 million shares or 9.46%, making the fund the company’s second-largest shareholder after Boon Siew Sdn Bhd, which has a 52.76% stake directly and indirectly.
As at Nov 30, EPF’s stake in Oriental stood at 44.25 million shares or a 7.13% stake.
“Oriental has about RM2.7 billion in cash and it only has loans and other short-term debts of around RM500 million. The group is basically sitting on a RM2.2 billion pile of cash, which makes it an attractive stock to buy,” an industry observer told The Edge Financial Daily.
The observer said the group’s net cash position could be the reason for investment funds to acquire its shares.
As at Sept 30, the group held cash and cash equivalents of RM2.8 billion while its total current liabilities amounted to RM896.48 million, of which RM540.45 million constituted loans and borrowings.
The group’s current assets stood at RM3.5 billion, out of RM6 billion of total assets. As at end-September, the company’s net tangible asset per share stood at RM6.98.
On top of its cash pile, the group has been consistently making profits. Profits for the past five financial years were well in excess of RM200 million, with the highest recorded at RM323.92 million in financial year 2007. The group registered RM249.59 million in net earnings for the financial year ended Dec 31, 2010.
For the nine-month period ended Sept 30, the group recorded RM179.73 million in net profit, up almost 44% from RM124.85 million in the same period last year.
According to Bharat Joshi, assistant investment manager at Aberdeen, as the group’s biggest value lies in its huge cash pile, Oriental’s assets are also undervalued.
He said some of these assets have not been revalued since the 1970s.
The group has diversified its earnings base from the traditional automotive distribution business under Boon Siew Honda company to oil palm plantation and property development.
“The group’s oil palm plantation business has been doing very well. It has close to 60,000ha in Indonesia and this segment has become the group’s anchor earnings contributor, overtaking the automotive distribution and autoparts manufacturing businesses,” said Joshi.
The plantation business contributed RM397.95 million or 16.5% of the group’s total revenue, lagging behind its automotive business with RM1.16 billion or 47.9% of the total.
However, in terms of profitability, the plantation division posted RM151.07 million or 47.8% of the group’s total profit before tax, outpacing the RM16.7 million recorded by its automotive business.
Oriental’s share price increased by 17 sen or 3.94% yesterday to end at RM4.48. Year-to-date, the stock has lost some 19.86% of its value.
“I think investors have started to appreciate that the stock has been undervalued,” said Joshi. “In uncertain times like this, cash is king. Investors might be banking on Oriental pulling off some interesting manoeuvres in the near future.”
This article appeared in The Edge Financial Daily, December 6, 2011.
At end-March this year, the fund had about 38.1 million or 6.14% of Oriental shares. Aberdeen first surfaced as a substantial shareholder in September last year, with 31.08 million shares or 5.01% equity interest. At yesterday’s closing price of RM4.46, the block of shares it owns in Oriental is worth some RM198.99 million.
At the same time, the Employees Provident Fund (EPF) has been paring down its stake in the company.
In July 2010, EPF’s holdings in the company stood at 58.68 million shares or 9.46%, making the fund the company’s second-largest shareholder after Boon Siew Sdn Bhd, which has a 52.76% stake directly and indirectly.
As at Nov 30, EPF’s stake in Oriental stood at 44.25 million shares or a 7.13% stake.
“Oriental has about RM2.7 billion in cash and it only has loans and other short-term debts of around RM500 million. The group is basically sitting on a RM2.2 billion pile of cash, which makes it an attractive stock to buy,” an industry observer told The Edge Financial Daily.
The observer said the group’s net cash position could be the reason for investment funds to acquire its shares.
As at Sept 30, the group held cash and cash equivalents of RM2.8 billion while its total current liabilities amounted to RM896.48 million, of which RM540.45 million constituted loans and borrowings.
The group’s current assets stood at RM3.5 billion, out of RM6 billion of total assets. As at end-September, the company’s net tangible asset per share stood at RM6.98.
On top of its cash pile, the group has been consistently making profits. Profits for the past five financial years were well in excess of RM200 million, with the highest recorded at RM323.92 million in financial year 2007. The group registered RM249.59 million in net earnings for the financial year ended Dec 31, 2010.
For the nine-month period ended Sept 30, the group recorded RM179.73 million in net profit, up almost 44% from RM124.85 million in the same period last year.
According to Bharat Joshi, assistant investment manager at Aberdeen, as the group’s biggest value lies in its huge cash pile, Oriental’s assets are also undervalued.
He said some of these assets have not been revalued since the 1970s.
The group has diversified its earnings base from the traditional automotive distribution business under Boon Siew Honda company to oil palm plantation and property development.
“The group’s oil palm plantation business has been doing very well. It has close to 60,000ha in Indonesia and this segment has become the group’s anchor earnings contributor, overtaking the automotive distribution and autoparts manufacturing businesses,” said Joshi.
The plantation business contributed RM397.95 million or 16.5% of the group’s total revenue, lagging behind its automotive business with RM1.16 billion or 47.9% of the total.
However, in terms of profitability, the plantation division posted RM151.07 million or 47.8% of the group’s total profit before tax, outpacing the RM16.7 million recorded by its automotive business.
Oriental’s share price increased by 17 sen or 3.94% yesterday to end at RM4.48. Year-to-date, the stock has lost some 19.86% of its value.
“I think investors have started to appreciate that the stock has been undervalued,” said Joshi. “In uncertain times like this, cash is king. Investors might be banking on Oriental pulling off some interesting manoeuvres in the near future.”
This article appeared in The Edge Financial Daily, December 6, 2011.
