Saturday, January 22, 2011

Khazanah Nasional : Championing towards Project 515

KHAZANAH Nasional Bhd has made it no secret that it aims to have five regional champions in its portfolio by 2015 the tail-end of the Government-linked Transformation Programme. Internally, the plan is called Project 515.
Some like Axiata Group Bhd and CIMB Group Holdings Bhd are already on the way there, says managing director Tan Sri Azman Mokhtar while others have the platforms to get there.
Who are they?
Telecommunication company Axiata, formerly TM International Bhd has come quite a long way since de-merging from Telekom Malaysia Bhd and listing in 2008.
Its market capitalisation has ballooned from RM12bil before the demerger to RM65bil to-date. Its stock was among the best-performing stocks on Bursa Malaysia last year, gaining more than 50%.
If financial results are anything to go by, for the nine months ended Sept 30, 2010, Axiata made a net profit of RM2.14bil versus RM1.09bil a year ago, up 96% while revenue for the period was higher by 21% to RM11.6bil.
A lot of this has to do with its compelling growth story overseas.
Apart from Celcom in Malaysia from which it derives a substantial amount of revenue, Axiata holds controlling stakes in mobile operators in Indonesia, Sri Lanka, Bangladesh and Cambodia with significant strategic stakes in India and Singapore.
With their fast growing population and still relatively immature telco segments, India and Indonesia are among the fastest growing telecommunications markets in the world and Axiata will benefit from that, according to analysts.
The second largest bank in the country by assets is rather well-known for its regional aspirations.
CIMB acquired Indonesia's PT Bank Niaga in 2002, followed by Singapore's biggest and most well-known stockbroker GK Goh Holdings Ltd in 2005.
In 2008, it bought into Thailand's Bank Thai, giving it a presence in the growing market there.
As at last year, CIMB's Indonesia unit was the fifth largest commercial bank and second largest mortgage lender in Indonesia.
It currently contributes about 20% of the group's profit. By 2015, it will likely contribute up to 40% according to CIMB group chief executive Datuk Seri Nazir Razak.
CIMB Thai Bank plc, which is 93.15% owned by CIMB reported a net profit of 828.85 million baht (RM82.75mil) for the financial year ended Dec 31, 2010, up from 1.67 million baht (RM159,739) recorded in 2009.
Khazanah got control of this Singapore hospital group last year but not without some struggle.
Khazanah had to outbid India's Fortis Healthcare who was also keen on the asset.
It emerged the winner after promising to fork out a whopping RM8.2bil for the group. While the market seemed to think it was overpaying at that price, Khazanah did not think so.
Parkway is Singapore's premier healthcare provider and is also South-East Asia's largest private healthcare group with business ventures in India and China.
“We've already got a platform in Parkway,” Azman says
Analysts say Parkway is in a sweet spot as it stands to gain from Asia's increasingly aging population and growth in purchasing power.
In Malaysia, Parkway operates through two brands, Gleneagles (one in Kuala Lumpur and another in Penang) and Pantai.
Parkway owns 40% of Pantai Holdings, which operates nine hospitals in the country. Singapore for now remains its key market.
Khazanah was thrust in the limelight late last year when its wholly ownedUEM Group Bhd put in a bid together with the Employees Provident Fund (EPF) to take over PLUS.
But just before shareholders could vote on the deal, a higher bid surfaced in the form of little known Jelas Ulung Sdn Bhd.
At that point, it looked like Khazanah could have been faced with another Parkway-like bidding war but in the end, the new bidder failed to come up with the required deposit and proof of financing which disqualified them.
PLUS minority shareholders will soon vote on the deal and in all likelihood, Khazanah and EPF will gain full control over the highway concessionaire.
But the tricky aspect of running PLUS is going to be the new concession agreement that will be inked by PLUS with the Government.
From a regional business point of view, PLUS has said that it would focus on India and Indonesia owing to their growing population and also because their respective governments are into building well-developed infrastructure.
PLUS recently announced the acquisition of up to a 74% stake in Indu Navayuga Infra Project Pte Ltd, the concessionaire for the 38.6km Pandalur-Trichy Highway in Chennai, India.
Another highway venture in India is via the Bhiwandi-Kalyan-Shil Phata Highway in Mumbai in which it has a 94% stake.
In Indonesia, the company has equity stakes of 55% and 60% in PT Lintas Marga Sedaya which built the 116km Cikampek-Palimanan Highway and PT Cimanggis-Cibitung Tollways, the builder of the 25.4km Package 4 Cimmanggis-Cibitung Highway.
In 2006, Khazanah forked out US$200mil (RM610mil) as a cornerstone investor of Singapore-based private reinsurance firm, Asia Capital Reinsurance Group Pte Ltd (ACR).
The remaining equity investment came from a blue chip syndicate of global investors including Och-Ziff, Morgan Stanley Private Equity, Credit Suisse Private Equity and the controlling shareholder of Investor AB, according to Khazanah's press release on the investment.
The transaction paved the way for Khazanah to go into the pan-Asia region focusing on independent reinsurer business, addressing the demands of the fast growing Asian property and casualty insurance industry.
ACR is capitalised at US$565mil, according to its website.
Its unit, ACR ReTakaful Holdings' two wholly-owned operating subsidiaries in Bahrain and Malaysia together provide the world's largest retakaful capacity and they underwrite both takaful as well as conventional business, information on its website said.

Khazanah's laggards

AMID the growing champions, Khazanah has identified several laggards under its portfolio. They are:
Probably one of the most obvious problems with Proton is that it is finding difficulties looking for a suitable partner to be competitive.
At one point, Volkswagen AG seemed to be an appropriate suitor, but last June, Proton said Volkswagen had confirmed that it had “other priorities” and discussions on a possible tie-up had come to a halt.
It appears the focus now is on a potential merger between Proton andPerusahaan Otomobil Kedua Sdn Bhd (Perodua), although there has been no fresh updates on this and most quarters are not for it.
Proton meanwhile has been reported recently to be in talks with several Indian parties to assemble its vehicles for the Indian market.
It also recently said it was trying to secure loans and investments of some RM2.4bil to turn around Group Lotus its sports car outfit.
TNB is missing a clear tariff formula which is hurting the utility firm especially now when the costs of coal prices one of its main raw material is rising.
The tariff pass-through formula which has been lobbied for the longest time and would have enabled the utility firm to pass on the higher fuel costs to consumers has not materialised.
The fact that it operates in a regulated environment with unresolved structural issues also plagues the company.
The airline industry is no doubt one of the toughest ones to operate in. Last year alone, volcano eruptions and snow blizzards threw airlines in a frenzy.
The industry that MAS operates in also lacks regulatory controls, Azman says.
Besides this, MAS' net gearing level is expected to rise over the next two years as some of its new aircraft come on board. This makes it very important for MAS to deliver consistent earnings so that it can meet its future capital and debt commitments.
Source: The Star, 22 Jan,2011

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