Tuesday, 14 February 2012

‘We are in it for the long haul’

KUALA LUMPUR: Businessman Datuk Raymond Chan, who bought into two companies within four months, says he is a committed investor who intends to stay in the companies in which he has invested for the long term.

In an interview with The Edge Financial Daily yesterday, Chan shot down talk that the purchases were a speculative move.

“If I were to buy shares in the company, I definitely want to go into the company. I wouldn’t want to speculate. That is not our style,” said Chan, the substantial shareholder of Harvest Court Industries Bhd and Naim Indah Corp Bhd. Shares in both companies have marched to multi-year highs.

“We remain committed to grow the business, same as Naim Indah. We go in, we go in with a purpose. It is not like we want to inject assets in there, cash it out and dilute minority interests. It is not our objective. We want to create wealth for everyone, that’s our objective. We are here to stay for long term,” he said.

Chan grabbed the headlines when he first surfaced as a substantial shareholder in Harvest late last year after he bought a 13.83% stake. Little-known Harvest then became the star performer on Bursa Malaysia last year.

Since Chan’s entry, the value of his stake in Harvest has risen more than 16-fold. In fact, Harvest shares and warrants were just uplifted last week by Bursa Malaysia from a two-month period under designated status due to “excessive speculation”.

Similarly, Naim Indah, another hardly traded stock, has soared 10 times year-to-date on ballooning trading volume after Chan emerged as the largest shareholder with a 12.11% stake this year.

Chan: We go in, we go in with a purpose. It is not like we want to inject assets in there, cash it out and dilute minority interests. It is not our objective. We want to create wealth for everyone, that's our objective. We are here to stay for long term.

In just four trading days, Naim Indah’s share price rocketed from nine sen to 67 sen on Feb 9 before the company announced the proposed asset injection by Chan. The stock fell 16% yesterday to 56 sen.

To recap, last Thursday Chan’s 67.69%-owned Generasi Cipta Sdn Bhd (Gencip) entered into a heads of agreement for the proposed sale of its 60% stake in Sagajuta (Sabah) Sdn Bhd to Naim Indah for an indicative price of RM240 million, valuing the company at RM400 million.

Naim Indah said it also intends to acquire the remaining 40% in Sagajuta not owned by Gencip, which will be satisfied via issuance of shares and loan stocks.

Based on Sagajuta’s estimated net asset value of some RM174.7 million on Dec 31, 2012, Gencip and Naim Indah may have paid a hefty premium for the former.

Sagajuta made a mere RM14.64 million in net profit for FY10 ended Dec 31 on the back of RM128.78 million in revenue.

The RM400 million price tag for Sagajuta implies a historical price-earnings ratio of 27.3 times, which some analysts find high relative to the market average and property stocks.

But after including the estimated revaluation of 1Borneo Hypermall worth RM169.8 million, into Sagatjuta’s net tangible assets (NTA), the premium paid by Naim Indah is less.

Including the mall’s revaluation, Sagajuta’s NTA rises to RM344.5 million, placing its valuation at 1.16 times NTA.

However, an analyst pointed out that when compared with REITs, assets are typically injected at prices below book value. This is to allow capital appreciation upside for the REIT and better yields.

When asked about Naim Indah’s prospects, Chan said, “We have a strong [management] team and if you see, we are quite diversified [in terms of talent]. Everyone has a role to play.”

Mohd Nazifuddin Najib, the son of Prime Minister Datuk Seri Najib Razak, is the executive chairman of Sagajuta. He is also its third largest shareholder.

Chan said a reverse takeover (RTO) is the best way to grow a private limited company.

“Sagajuta as a private company has limitations to grow. Property is a very cyclical business. So, we really need to look for opportunities to make it big.

“So, I looked at Naim Indah. They have timber, a property development arm, and they have a shopping mall, which fits quite nicely with what we already have. The other thing is oil and gas; there is hype in this industry and the margin is healthy.

“For us to make it in a big way, we have to be a listed company, and from that we can build on our brand name. RTO was the fastest way for us. IPO (initial public offering) needs long track record,” he said.

Chan said one factor that stopped Sagajuta from going for a listing via the IPO route is that it does not have a sizeable landbank.

“This was one of the challenges. We have to acquire landbank; we need a vehicle that is big enough for us to raise funds and access the equity and debt markets,” he said.

To facilitate the RTO, a reduction in par value was proposed as well as a rights issue and private placement that would raise some RM100 million.

“One part [of the RTO] is to pare down the debts, and the other is to grow the business. There is nothing more to it than that. It is quite a simple exercise. We are rewarding shareholders by giving them two free warrants,” said Chan.

Chan also said it is too early to say whether the enlarged Naim Indah will have another round of fundraising for its future expansions after proposed rights issue.

“I have to re-look at our position. Give us about one or two months, then we’ll know [whether we need to raise funds from the equity market]. But exciting times are ahead, definitely, because there are more plans that we can work on now as a listed company,” he said.

This article appeared in The Edge Financial Daily, February 14, 2012.

Get your T+10 interest FREE margin trading account NOW. Attractive brokerage for online trading. Contact Mr Ho at +603-5192 0808 or hoxian@sjsec.com.my for more details.
Related Posts Plugin for WordPress, Blogger...