Thursday 28 Mar 2024
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This article first appeared in The Edge Malaysia Weekly on March 23, 2020 - March 29, 2020

IN the second week of March, Urusharta Jamaah Sdn Bhd (UJSB) — the wholly-owned unit of the Ministry of Finance (MoF) that took over Lembaga Tabung Haji’s (TH) non-performing assets in late 2018 — started selling some of the shares it had taken over.

The sale of these shares in 13 companies is likely to be at a loss, owing to weak market conditions. It also raises the question as to the timing of the sale and why it is being done now.

“At least there should be some explanation … Why sell now when the market is at its weakest and there are no buyers?” asks a seasoned remisier.

With the Covid-19 shutdown, UJSB could not be contacted for comment.

To recap, UJSB came to have stakes in 106 listed companies, one unlisted plantation counter and 29 properties, including four hotels and a plot of land at Tun Razak Exchange, at end-2018. TH no longer has stakes in these 106 counters.

UJSB forked out a steep RM19.9 billion to TH for the assets, as their book value was only about RM10 billion. Nevertheless, the whole exercise was aimed at restoring TH.

To put things in perspective, the benchmark FBM KLCI averaged 1,631.12 points in 2019. From early March up to March 19, the FBM KLCI averaged 1,390 points, which means UJSB is piling on the losses.


What UJSB has started selling

During the period from March 2 to 19, when UJSB commenced selling, the FBM KLCI fell 271.31 points, or 18.2%, to 1,219.72 points.

UJSB took over 43.5 million shares, or 9.35% equity interest, in the civil engineering and building contractor WZ Satu Bhd at end-December 2018 and, on March 6, 9 and 12 this year, it sold 2.58 million shares, leaving it with 40.92 million shares, or just under 8% equity interest.

From March 6 to 12, WZ Satu’s stock traded at 12.5 to 16.5 sen. In 2019, WZ Satu’s share price averaged 25.1 sen, which means it has shed more than a third of its value.

TH surfaced as a substantial shareholder in WZ Satu with 19 million shares, or an 8.33% stake, after a private placement in late October 2014, at RM1.60 per share, which would indicate that the pilgrim fund forked out RM30.4 million for the shares.

There were two bonus issues, one for every five shares held in March 2017 and another one-for-three in May 2018, which explains the increase in the number of WZ Satu shares held by TH when it was transferred to UJSB.

It is also worth noting that WZ Satu paid out dividends of two sen per share in February 2016, three sen (two sen final dividend and one sen special dividend) in March 2017, and two sen in March 2018. However there has been no payout or corporate exercise since UJSB took over the shares.

UJSB held 121.3 million shares, or 8.62% equity interest, in construction outfit WCT Holdings Bhd prior to a sale of 12.79 million shares on March 5, 10, 11, 12 and 16. UJSB now has 108.51 million shares, or a 7.74% stake, in the company.

Last year, WCT’s stock averaged 92.4 sen apiece, in contrast with March 16, when it closed at 38.5 sen, meaning WCT had shed close to 60% of its value. WCT’s stock dipped below 25 sen last Thursday.

TH has been a substantial shareholder in WCT from as far back as June 2013, when it surfaced with 56.31 million shares, or 5.15% equity interest. In a nutshell, its shareholding fluctuated until it gave it up in December 2018.

Back-of-the-envelope calculations indicate that WCT has paid out about 18.3 sen in dividends from the time the pilgrim fund became a substantial shareholder, which benefited TH. There have also been share dividends, rights issues and a one-for-five bonus issue of shares since June 2013.

At Lion Industries Corp Bhd (LICB), UJSB sold 5.83 million shares on March 6, 9, 10, 11 and 12, trimming its stake to 38.2 million shares, or 5.61%.

From March 6 to 12, LICB traded between 25.5 sen and 31 sen, while it averaged 48.3 sen in 2019. TH has been a substantial shareholder in LICB since August 2011, and has regularly traded its stock.

From the time the pilgrim fund has been a substantial shareholder in LICB, the company has paid out six sen in dividends, the last payout being in 2014.

In contrast to its average of 48.3 sen in 2019, LICB has shed more than a third of its value. It is worth noting that LICB closed at a multi-year low of 13 sen last Thursday.

From March 5 to 10, UJSB hived off 21.35 million shares in diversified MMC Corp Bhd, trimming its stake to 212.47 million shares, or 6.98% equity interest. During the four trading days, MMC’s stock averaged 80 sen. In contrast, last year, MMC’s average trading price was RM1.02.

MMC’s stock has shed more than 52% of its value from its average trading price last year to March 19, when it closed at 48 sen.

TH has been a substantial shareholder in MMC since December 2014, and received 15.3 sen in dividends. UJSB, meanwhile, received a four sen per share payout in 2019.

UJSB ceased to be a substantial shareholder in Star Media Group Bhd after it sold 2.89 million shares between March 5 and 12, trimming its stake in the media company to below 5%.

Between March 5 and 12, Star traded at 33 sen to 37.5 sen, an average of 35.4 sen. In contrast, the share price averaged 61.3 sen last year.

The sale by UJSB would mean that it will be missing out on Star’s dividend of two sen per share going ex on March 30, with payment slated for April 17.

TH surfaced as a substantial shareholder in Star in June 2014, and made close to RM1 per share in dividends before it gave up its shares in December 2018.

UJSB sold 6.07 million shares in property developer MCT Bhd from March 5 to 11, trimming its stake to 127.41 million shares, or 8.74% equity interest.

Last year, MCT’s average share price was 34.7 sen, compared with 18.7 sen from March 5 to 11 this year. MCT closed last Thursday at a multi-year low of eight sen.

It is also worth noting that MCT had received notice of an unconditional takeover offer at 88 sen per share from Ayala Land Inc in January 2018, after the Philippine-listed outfit raised its stake in MCT to 50.19% from 32.95%, but the pilgrim fund did not accept the offer.

The pilgrim fund has been a shareholder of MCT since mid-April 2015, and likely did not accept the 88 sen offer because its holding costs was probably high, as MCT traded above RM1.20 from January to April 2015. MCT also stopped paying dividends after a two sen payout in September 2015.

At another property company, Mah Sing Group Bhd, UJSB sold 8.31 million shares from March 6 to 16 this year, trimming its stake to 131.44 million shares, or 5.41%.

From March 6 to 16, Mah Sing’s shares traded at 42.5 sen to 63 sen, which translates into an average of 53.6 sen. Last year, Mah Sing’s stock averaged 83.5 sen.

TH has been a substantial shareholder in Mah Sing since Aug 30, 2015, back when the property developer’s stock was trading at more than RM1, and taken home more than 30 sen in dividends per share.

UJSB disposed of 20.27 million shares in oil and gas outfit Reach Energy Bhd on March 10 and 11, leaving it with 79.92 million shares, or a 7.29% stake. On both days, Reach traded unchanged at 6.5 sen, in contrast to its average trading price of 23.6 sen last year.

TH surfaced as a substantial shareholder in Reach Energy at end-March 2016, with 64.54 million shares, or 5.05% equity interest. At the time, Reach Energy was trading at 65.5 sen to 68.5 sen.

UJSB ceased to be a substantial shareholder in Icon Offshore Bhd on Jan 23, after the MoF entity sold 972,225 shares. On Jan 23, Icon’s shares were trading at 41.5 sen to 67 sen, following a huge spike.

However, UJSB surfaced again as a substantial shareholder in the offshore support vessel player on Feb 18, with 133.8 million shares.
 

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