This article first appeared in The Edge Malaysia Weekly on December 5, 2022 - December 11, 2022
STEEL bar manufacturer Malaysia Steel Works (KL) Bhd (Masteel), whose stock price has jumped 60% over the past month, is said to be a takeover target of a Bursa Malaysia-listed integrated builder conglomerate, according to market sources.
“A locally listed building materials distributor, which has been actively acquiring companies and businesses in recent years, is now eyeing Masteel as its next target,” a source tells The Edge.
“Just take a look at Masteel’s share price performance since mid-November. Something is definitely brewing in the company, possibly at the shareholder’s level,” another source observes.
When contacted by The Edge, Masteel managing director and CEO Datuk Seri Tai Hean Leng says his family’s stake in the company is not for sale — at least for now.
“We are not planning to sell our majority stake at this moment,” stresses the 58-year-old steel businessman, who has more than three decades’ experience in the iron and steel industry. He adds that he is unaware of any reason for the recent increase in Masteel’s share price.
So far this year, shares in Main Market-listed Masteel have gained 20%, settling at 38 sen last Friday, giving it a market capitalisation of RM261.46 million.
Tai owns 31.58% equity interest in Masteel, of which 0.21% is a direct stake; the remaining 31.37% is an indirect stake held through vehicle TYY Resources Sdn Bhd.
According to Masteel’s 2021 annual report, Tai was appointed the group’s executive director in April 1994. He has been involved in the formulation and implementation of the company’s corporate strategies, including corporate planning, business expansion and operations.
Tai is a board member of the Malaysia Steel Institute (MSI) and vice-president of the Malaysia Steel Association (MSA).
It is worth noting that Datin Ng Pik Lian and the Estate of Tai Chet Siang (deceased) are also substantial shareholders of Masteel by virtue of their interests in TYY Resources.
Sources speculate that the Tai family might be willing to let go of their stake in Masteel for about RM100 million.
“Discussions and negotiations are being held at the shareholders’ level. From what I know, both parties have nearly come to some sort of agreement, but due diligence still needs to be done. If everything goes well, the deal could be announced within the next one to two months,” says the source.
Another source highlights that Masteel is trading at a 70% discount to its net tangible assets (NTA) per share of RM1.27 as at Sept 30.
“At the current market price, it would be a steal for the potential buyer,” he says.
Refusing to disclose the identity of the buyer, the source mentions, however, that it is a multibillion-ringgit firm with exposure in the property development, construction, solar and kitchen furniture businesses.
Masteel began its operations in 1971, producing commercial-grade mild steel round bars and ingots at its rolling mill in Petaling Jaya, Selangor.
Today, Masteel is one of the country’s leading steel manufacturers specialising in making high-tensile steel bars, mild steel bars and prime steel billets that are most commonly used for construction and infrastructure development works.
The group also operates a factory in Bukit Raja, Klang, producing steel bars and steel billets, which are the feedstock for its rolling mills in Petaling Jaya and Bukit Raja plants.
Both manufacturing plants are equipped with modern equipment and fully computerised to produce precision quality products from both the mills.
Masteel serves customers domestically, as well as internationally in the Philippines, China, Australia and Singapore.
Interestingly, Masteel also has a 48.25%-owned associate company, Bio Molecular Industries Sdn Bhd (Bio-M) — a strategic partnership between Masteel and Curium International SA, a worldwide leader in radiopharmaceuticals.
Bio-M is principally involved in producing radiopharmaceuticals for the diagnosis and management of cancer patients. Its radioisotope manufacturing facility is located in Bandar Enstek, Negeri Sembilan.
Last Tuesday, Masteel reported a net profit of RM17.39 million in the nine months ended Sept 30, 2022 (9MFY2022), down 15% year on year from RM20.46 million.
“Masteel will continue to improve its technological capabilities to reap the benefits arising from the anticipated upswing in demand and prices of steel in 2023,” it said.
As at Sept 30, Masteel had cash and cash equivalents of RM64.74 million, short- and long-term borrowings of RM376.7 million and RM70.4 million respectively, translating into net gearing of 44.48%. Meanwhile, its inventories stood at RM704.7 million and its trade and other receivables amounted to RM192.11 million.
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