Berjaya Corporation Berhad
BERJAYA Corporation Berhad has, of late, been quite active in streamlining its businesses — that spans across multiple industries including the consumer, motor, financial services, gaming & lottery management, hotel & F&B as well as property investment and development — and identifying assets for spin off as separate entities. This included the initial public offerings (IPO) of Berjaya Auto in November 2013 and more recently, 7-Eleven in May 2014.

Given that the stock is currently trading at only 0.3 times its book value of RM1.42, it is no wonder that BCorp would move to unlock some of this value. As a separate entity, these spin offs can usually command better valuations by appealing to a more targeted group of investors. Most conglomerates, on the other hand, tend to trade at a “holding company discount”.

Additionally, BCorp has a relatively high gearing of 72.4% as at end-July 2014 or net debt totalling RM4.2 billion. An IPO allows it to raise cash from the market and de-gear, whilst still preserving a controlling stake over the business.

The most recent talked-about possible IPO is that of its environmental services arm, but BCorp has not given a timeframe for the planned listing. Joint ventures in casinos in North Asia also seem to be in the works (refer TEFD, October 30, 2014).

BCorp fell into the red with a net loss of RM148.9 million in FYApril2014. This was due, mainly, to some RM227.8 million in investment related expenses — including RM181.5 million for goodwill impairment. The diverse nature of BCorp’s businesses is partly the reason for its rather erratic earnings from year- to-year.  The company returned to the black in 1QFY2015, with net profit of RM8.3 million.

We continue the discussion tomorrow by looking at some of BCorp’s subsidiaries and assets.

This article first appeared in The Edge Financial Daily, on November 3, 2014.