Friday, May 20, 2011

Would You Be Disgusted With The Relisting Of Johor Port?

I never like the idea to invest in a listed subsidiary of a holding company.

Why?

Because the holding company can list and delist anyhow they like!

Take Bumi Armada example: How Will Previous Shareholders Feel About Bumi Armada's Re-Listing, in which, despite all the protest from the investing public, Bumi Armada was forcefully taken private at a PE of 7x and it now, according to banking sources published in the local media, Bumi Armada could be relisted at a PE of 20x!

And mind you, the PE multiple of 7x was based on 'then current' earnings and it totally discounted the growth. Yeah and what stinks is that stocks are valued based on future earnings! Apparently future earnings does not matter during privatisations!

I do remember one shouting out loud in dismay that during IPO stocks are sold based on optimistic future earnings and on double digit PE multiples and when they delist, they delist it based on single PE multiple.

Is this fair?

Let's look at another example. Take the Johor Port debacle once again.

Dec 2005.

  • Bloomberg -- MMC Corp., a Malaysian builder and engineering group controlled by Syed Mokhtar Al-Bukhary, agreed to buy his 52 percent stake in Johor Port Bhd. for 427 million ringgit, expanding its port business.MMC is buying 170.8 million Johor Port shares at 2.50 ringgit apiece from his Seaport Terminal (Johore) Sdn Bhd., it said today in a statement. MMC will later offer to buy the rest of Johor Port and delist it.
So MMC took Johor Port private. Johor Port had a share base of 330 million. The privatisation offer at 2.50 effectively valued Johor Port at 825 million.

This is Johor Port's earnings reported on Nov 2005: Quarterly rpt on consolidated results for the financial period ended 30/9/2005

Now let's look at some OTHER simple facts and figures.

This is what Johor Port has been earnings since fisal year 2001. (read from left to right)

58.1mil -> 60.1mil -> 74.8mil -> 83.9mil -> 83.4 mil (Does this suggest impressive earnings growth or what? )

Most recent 4 quarters net profit totals some 100.962 million. (an eps of 30.5 sen)

Current year-to-date net profit (3 quarters) 88.098 mil.

Current year-to-date cash flow. ie piggy bank increased by some 41.742 mil.

Piggy bank cash? 286.787 mil.

Loans? Some 180 million long term islamic loans.

Net cash (cash - loans) is about 106.787 million. ( Net cash per share is about 35.5 sen)

And then there is entry in the balance sheet which states that amount due from holding company is 50.223 million.

And in Feb 2006:


An EPS of 30.89 sen!!

And yeah Johor Port was eventually delisted at 2.50.!

And on Monday, 16 May 2011: Update MMC plans to list Gas Malaysia, Malakoff, Johor Port

The following caught my attention.

  • According to Hasni, Malakoff is worth about RM7 billion currently while Gas Malaysia and Johor Port are worth RM5 billion and RM1.5 billion respectively.


And apparently now that Johor Port wants to be listed again, Johor Port is now worth 1.5 Billion.

OMG! OMG! OMG!

When it was delisted Johor Port was rather worth less. Only about some 825 million.

Of course, they would be smart to argue that Johor Port now is not the same when compared to Johor Port back in 2005/2006.

Of course it's not the same.

But just tell that to all those previous minority shareholders of Johor Port.

Were they given a chance to continue their investment in Johor Port? Were they fully compensated in a company that had cash and earnings growth? Were they treated fairly when Johor Port was taken private and delisted back in 2006?

How?

Seriously does the minority shareholders matters?

Or are the minority shareholders there so that they can be taken advantage of?

Sigh!

What's that smell?

1 comments:

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