THE proposed sale of a piece of property by Perak Corp Bhd to a unit owned by the Perak government has not gone down well with some of its minority shareholders.
On Dec 19, Perak Corp proposed to dispose of Wisma Wan Mohamed together with the land on which it stands, in Ipoh, Perak, for RM14.2 million to Perak Agro Properties Sdn Bhd. Since Perak Agro Properties is an indirect wholly-owned subsidiary of the State Agriculture Development Corporation (SADC), which is under the purview of the Perak government, the proposed disposal is deemed a related-party transaction (RPT).
The timing of the proposed deal raises eyebrows as the state government had just recently aborted a plan to privatise Perak Corp, in which it owns 52.9%, following the objection of substantial shareholder Sime Darby Property Bhd.
“We are concerned about the proposed RPT, which has happened so soon after the selective capital reduction (SCR) offer (to privatise Perak Corp) was aborted,” says a minority shareholder.
State-owned Perbadanan Kemajuan Negeri Perak (PKNP), which controls 52.9% of Perak Corp, on Oct 24 applied to the Securities Commission Malaysia (SC) to withdraw its SCR offer at RM3.90 per share, which valued Perak Corp at RM390 million. The withdrawal was made four days after Sime Darby Property informed Perak Corp that it intended to vote against the proposed SCR at the extraordinary general meeting (EGM).
Sime Darby Property owns a 6.13% stake in Perak Corp, which represents 13% of the outstanding voting shares excluding PKNP’s. It was in a position to block the SCR, as under the SC’s rules, the value of the votes cast against the proposed SCR at the EGM must not be more than 10% of the votes held by the remaining shareholders.
It is understood that PKNP’s offer price of RM3.90 is way below the market value of Perak Corp’s assets, notably its landbank in Perak that has not been revalued for years. As at Sept 30, 2014, Perak Corp’s net asset per share stood at RM5.54 while its nine-month net profit stood at RM32.77 million.
The proposed SCR was officially withdrawn by PKNP on Dec 10, 2014, after it received approval from the SC.
Minorities have questioned the timing of the proposed RPT. “The question is the timing. Also, the value of this RPT doesn’t hit the threshold and hence, it is not subject to shareholders’ approval. There is nothing much we can do to stop Perak Corp from selling the assets to Perak Agro,” says the minority shareholder.
According to Perak Corp’s filing with Bursa Malaysia, the company acquired Wisma Wan Mohamed in 1997 for RM11.9 million and incurred renovation cost of RM300,000.
In a filing with Bursa, Perak Corp says its net assets per share would increase about 3 sen post-disposal. As at Sept 30, 2014, the group’s net assets per share stood at RM5.54, which is 42% higher than the SCR offer price.
A quick check of its latest annual report shows that Perak Corp has 141.53 acres of freehold agricultural land in Kinta, Perak, that have been approved for mixed-use development. The land was acquired in end-1997 and was carried at a NBV of only RM23.82 million or RM3.86 per sq ft.
The group also owns a hotel, convention centre and two office towers on a 7.34-acre freehold parcel in Kinta, with a value of RM78.53 million. It also owns a wharf, warehouse and office complex building on a 72.54-acre leasehold parcel in Lumut, Manjung, which has a NBV of RM80 million. The property is used by its port operations — its major profit contributor.
Its 51%-owned subsidiary Lumut Maritime Terminal Sdn Bhd provides handling services for the import of coal for Tenaga Nasional Bhd’s new 1,010mw Manjung 4 Power Plant located at Pulau Lekir 1. The contract will expire on March 30, 2040.
Perak Corp also owns a 15.74% stake in Bursa-listed port operator Integrax Bhd. The stake is valued at RM108 million.
Its balance sheet shows that Perak Corp is fundamentally healthy, sitting on RM118.74 million cash with total borrowings of RM110.24 million as at Sept 30, 2014. It has a shareholders’ fund of RM554.15 million.
The net book value (NBV) of the property was RM9.8 million as at Dec 31, 2013. Perak Corp will see a book gain of RM3 million when the disposal to Perak Agro takes place.
The company said a valuation of the property had been carried out by an independent registered valuer, Messrs Raine & Horne International Zaki + Partners Sdn Bhd, on July 29, 2013. The market value of the property was RM13 million then.
However, the minority shareholder argues that the disposal price of RM14.2 million is only 19.3% higher than its purchase cost from 17 years ago. The shareholders would prefer that the company calls for a tender to get a better price.
This article first appeared in The Edge Malaysia Weekly, on January 5 - 11, 2015.
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