This article first appeared in The Edge Financial Daily on May 30, 2019

KUALA LUMPUR: MAA Group Bhd’s share price slumped 20 sen or 20.1% yesterday after its controlling shareholder Tunku Datuk Yaacob Khyra said the group will not raise the price for a proposed selective capital repayment (SCR), following the rejection by minority shareholders.

The proposal, which was meant to pave the way for Yaacob to take the group private, fell through after 62.07% of minority shareholders voted against it at the group’s extraordinary general meeting (EGM) yesterday, versus 37.93% who wanted the plan — at RM1.10 per share — to go through.

The group’s share price dived on the news. It closed at its intra-day low of 79.5 sen after the 20-sen retreat, with 2.06 million shares traded.

Speaking to reporters after the EGM, Yaacob, who controls 38.6% of MAA via Melewar Group, said there will not be a revised SCR offer.

Yaacob is the only substantial shareholder in MAA.

“It is one-off. The shareholders have decided for [MAA] to continue listing ... So now it is for us to go on along that route,” said Yaacob.

Yaacob also justified the SCR as being made to “realign the market price” of MAA shares, which has long traded at the 50-sen range.

“The good thing is shareholders now realised that the company is worth a lot more. It (share price) might go down [after the SCR was rejected], but that is cheap! The shareholders value it at RM1.90. Ask yourselves how much would you pay for the company,” said Yaacob.

He said the next course of action is to negotiate with regulators to allow MAA to embark on multiple acquisitions of smaller businesses, instead of looking for one big company that makes RM20 million per year under its current restriction as a Practice Note 17 entity.

“A company of that size can go on listing by itself, so [sellers] ask for high price,” said Yaacob. “[The regulators] need to be more flexible... It is easier to buy five companies making RM4 million each.”

He added that it is not possible for MAA to look for companies in the financial services segment of the right size because they are either too big to acquire, or smaller than required under regulatory guidelines.

“That is what MAA really wants to do — financial services. So we will keep our insurance business [in the Philippines] and grow that, but to comply with regulatory requirements, we will buy into [other segments],” said Yaacob.

According to the group’s circular to shareholders, among the conditions of the SCR is that it must not be voted against by more than 10% of MAA’s non-interested shareholders.

Minorities’ main grouse is the payout of RM1.10 per share, which works out to just RM184.51 million.

As at end-December, MAA — excluding its insurance business in the Philippines — had total assets of RM447.13 million, of which 51.7% or RM231.31 million was in cash.

Also as at end-December, MAA’s net asset per share was at RM1.94, which means the SCR of RM1.10 is at a 43% discount to the company’s net assets.

In the circular, the group noted that the SCR offer price of RM1.10 represents a discount of 76 sen (40.9%) to 98 sen (47.1%) to the estimated fair value per MAA share, which ranges from RM1.86 to RM2.08 (of which about 85 sen is attributable to cash and cash equivalents per MAA share as at end-December).

Separately, MAA returned to profitability yesterday in its first quarter ended March 31, 2019, with a net profit of RM6.57 million, versus a net loss of RM12.63 million a year ago. The improved quarter was due to higher earnings from its general insurance business, while its investment holdings segment returned to black, its stock exchange filing showed.

Revenue grew 13% to RM44.24 million from RM39.16 million on higher gross earned premiums under its insurance business, and higher investment income.