FocusM 06 cover story

April 27-May 3, 2013 Minority shareholders beware Companies have many ways to manoeuvre deals to short-change minorities

HE current brouhaha over Act (CMSA) to require the offeror to sia’s low liquidity and velocity of trading the books at cost price. The Minority listed companies being taken compulsorily acquire their shares if the allows very substantial under-valuation Shareholder Watchdog Group (MSWG) private by their controlling offeror already owns more than 90% of of any stock to persist for long periods. then said there could be a potential shareholders is just one the company’s shares even though they The offerors merely take advantage of revaluation surplus for the properties instance where minority did not accept the offer initially. mispricing by the market because of a and land that have not been revalued shareholders can be short-changed. “Even in the event of an offeror broad-based lack of participants in the for years. T by There are other ways where minor- DOREEN invoking compulsory acquisition under market. Independent adviser TA Securities LEONG ities are taken for a ride. These include the law, final recourse to the courts is “It has been my contention for a long stated that the deal was “not fair and related party transactions not at arm’s still available for dissenting sharehold- time that our stock market capitalisa- but reasonable” due to the significant length, injection of assets at inflated ers under section 224 of the CMSA,” he tion is too big for an economy the size discount of 59% to NRGB’s net assets prices, special placement of warrants/ explains. of Malaysia. Ranked by stock market per share. shares to related parties at discounts, Among the recent corporate exercises cap to GDP, we are the 6th highest in the TA Securities had also considered breaking up assets and selling at low are: world after Switzerland, HK, Singapore, factors such as historical market prices, prices and delisting and later relisting in Swaziland and Taiwan. price-to-earnings multiple over the a short span of time at higher valuations. Takeovers/buyouts Pong adds that the result of an average earnings per share for the past But what is interesting is that minor- Minority shareholders are no longer excessively high ratio in Malaysia is the three years, enterprise value/earnings ities are now fighting back. Their sweet acquiescent when major shareholders small caps suffer from low valuations before interest, taxes, depreciation and success in blocking recent takeover of the company offer a premium over and are more often than not ignored by amortisation and the premium paid for attempts by major shareholders is un- the value of the company’s shares on institutional investors. “So the small past precedents of successful Malaysian precedented in corporate Malaysia. And the open market when the deal was cap stocks in Malaysia are sleepy stocks, privatisations. they are winning. announced. stuck with low valuations and liquidity However, it said the exercise was Gone are the days where it’s a Savvy minority shareholders will in a self-reinforcing downcycle,” he says. reasonable due to NRGB’s inconsistent foregone conclusion that minority probably assign different valuations for On the other hand, in the case of a financial performance for the past shareholders do not have a choice but to the company depending on the industry company in financial difficulties and six years, the future prospects of the sell out in a takeover exercise, especially it is operating in. facing bankruptcy, the book values used property industry in Nilai and education involving government-owned institu- One of the most common tools to for its assets may turn out to have been industry for local players which is not tions. quickly gauge whether the offer price too high and not realisable under the encouraging. This is especially so in the case of is fair is to look at the company’s net fire sale conditions that are then likely Gan had successfully taken NRGB minority shareholders going up against tangible asset (NTA) per share, which to prevail. private via a selective capital reduction mega corporations as witnessed in the is one measure of the worth of a share, Book values can also be too low rath- (SCR) and repayment exercise which was unsuccessful buyout of MISC Bhd by although its usefulness is subject to er than too high, particularly if assets completed in December last year. Petroliam Nasional Bhd (Petronas). In March, Emas some reservations. It can be compared have not been revalued recently in order Companies that have been taken Another feather in the cap for minor- Kiara’s major to the market value of the share. to allow for inflation and the costs of private at a discount to their previous ity shareholders is the failed buyout of shareholder and Nevertheless, is it fair for companies replacement. book values include Leong Hup Hold- deputy executive Hong Leong Capital Bhd (HL Cap) which chairman Wong to determine the takeover price based ings Bhd, Premium Nutrients Bhd, OSK saw some 2% of its shareholders coming Kong Foo made a on the share price trend or should the Nilai Resources Group Bhd Properties Bhd, Merge Housing Bhd and together to stave off the compulsory conditional offer to takeover price be based on the compa- For example, the minority shareholders YTL Cement Bhd. acquisition by Hong Leong Financial take the company nies’ NTA or other valuation methods? of property developer Nilai Resources Group Bhd. private According to Inter-Pacific Research Group Bhd (NRGB) complained about Emas Kiara Industries Bhd On the other hand, although MBf head Pong Teng Siew, this is the crux of the takeover offer of RM1.50 per On the other hand, Emas Kiara Indus- Holdings Bhd has finally ended the long- the issue when independent advisers share by Tan Sri Gan Kong Seng as the tries Bhd, a geotechnical engineering drawn affair after its third attempt to be offer opinions that a takeover offer is offer price was far below its net assets of company providing engineering taken private by its major shareholder not fair because of the offer price being RM3.68 per share. solutions for civil marine engineering Tan Sri Dr Ninian Mogan Lourdenadin, too far below the fair value of a stock. Disgruntled shareholders believe and construction applications with geo- it was not without much resistance from “But the offer can still be reasonable some of NRGB’s assets are worth more synthetic products, may see its takeover its minority shareholders. because it is more than the market price at market value such as its 27-hole golf exercise being scuttled. In such instances, what are the of the share. It shows that Bursa Malay- course in Nilai which was recorded in But independent adviser HwangDBS regulators such as the Securities Com- Investment Bank Bhd threw a spanner mission (SC) doing to ensure minority Performance of companies taken private in the works as it states that the offer shareholders’ rights are protected? price was not fair and not reasonable. It According to an SC spokesperson, Company Delisting date Profit after tax Profit after tax % y-o-y is rare for an offer to be not fair and rea- the legal and regulatory framework for (pre-acquisition) (RM) (post-acquisition) (RM) change sonable as usually it is deemed not fair taking companies private in Malaysia YTL Cement Bhd April 16, 2012 2011: 354,096,000 2012: 435,971,000 23.12% but reasonable by independent advisors. is similar to that in Hong Kong and In March, Emas Kiara’s major share- Eastern Pacific Singapore. Industrial Corp Bhd Oct 27, 2011 2011: 56,602,000 2012: 76,667,000 35.45% holder and deputy executive chairman “The role of the SC as a regulator is Berjaya Retail Bhd May 3, 2011 2010: 51,931,000 2011: 46,341,000 -10.76% Wong Kong Foo, made a conditional to ensure that there are adequate rules offer to take the company private for MEASAT Global Bhd Sept 29, 2010 2010: 122,093,000 2011: 25,292,000 -79.28% to safeguard the interests of minority 45 sen per share, which is a premium of M3nergy Bhd Oct 7, 2010 2011: (8,600,000) 2012: 1,156,000 113.44% shareholders when a takeover is hap- 23.28% or 8.5 sen based on the pre-sus- pening or takeover offer is being made,” Sarawak Energy Bhd Jan 5, 2010 2010: 336,218 2011: 335,584 -0.19% pension price of 36.5 sen. the spokesperson says. New Straits Times Wong and persons acting in concert Press Bhd Jan 5, 2010 2009: 38,146,000 2010: 72,820,000 90.90% He adds that apart from the right to 2011: 57,295,000 -21.32% with him held a combined 48.77% stake vote at a general meeting for the pro- IOI Properties Bhd April 28, 2009 2010: 503,781,000 2011: 633,795,000 25.81% comprising 43.52 mil shares following posed delisting, minority shareholders 2012: 633,795,000 -7.20% several corporate exercises. are also given the right under section In its independent advice circular, 223 of the Capital Markets and Services Source: CCM HwangDBS said the offer price of 45 sen FocusM It has been my contention for a long time that our stock market capitalisation is too big for cover story 07 an economy the size of Malaysia.” – PONG TENG SIEW April 27-May 3, 2013

List of some major questionable deals now seeking to relist on Bursa Malaysia. Methods Date Companies Details Independent adviser’s valuation/ remarks The main contention point is that these Taking private March 12, 2012 Emas Kiara Wong Kong Foo made a cash A discount of 35.71% and 38.36% to the range of companies were then delisted at very offer of 45 sen per share. equity valuation of Emas Kiara of 70 sen and 73 sen based on the discounted dividend valuation low valuations, only to later be relisted Feb 6, 2013 MBf Holdings Tan Sri Ninian Mogan Lourdenadin The revised offer is not fair because of a 27.55% and at richer valuations. revised his GO offer to RM1.775 per 44.53% discount to valuation range of adjusted NA MSWG CEO Rita Benoy Bushon share and 77.5 sen per warrant from per share of RM2.45 to RM3.20 per share. But it is often highlights that in such cases, RM1.50 per share and 50 sen per warrant. reasonable as the offer price is above their historical Ninian secured 98.1% shares, to proceed prices since 2003. minority shareholders are the losers with delisting. when the prices offered are low while Jan 31, 2013 MISC Petroliam Nasional Bhd made a general Offer was unfair as it was priced at a significant the beneficiaries of these exercises are offer of RM5.30 on 31 Jan, 2013 and revised discount to MISC’s sum-of-parts valuation of between the corporate advisers and major share- to RM5.50 on Apr 4, but failed to take MISC RM5.69 and RM6.20 per share. private with only 86.07% voting shares. But reasonable due to a weak shipping outlook that holders, who “profit from each change in may persist and the absence of a competing bid direction”. Jan 14, 2013 Hong Leong GO made by HL Fin Group for a cash Offer price was “fair and reasonable”, citing the Among the companies taken private Capital Bhd consideration of RM1.71 per share. Plan counter’s low liquidity. to take it private was not successful. which re-entered the local bourse albeit March 16, 2012 ESSO MGO by Petron Oil & Gas International The price equates to 1.84 times earnings before in different forms are Maxis Commu- Malaysia Bhd Sdn Bhd at RM3.59 per share. interest and tax and was lower than the median of nications Bhd (delisted in 2007), Bumi 22.9 times for five similar global deals by oil refiners and retailers in the past 12 months. Armada Bhd (delisted in 2003) and Feb 20, 2012 Nilai Resources SCR by Akarmas Sdn Bhd and Tan Sri Gan Offer not fair and but reasonable due to the significant Astro Malaysia Holdings Bhd (delisted Group Bhd Kong Seng for RM1.50 per share. Three and six discount of 59% to NRGB’s net assets per share of RM3.68 months premium are 58 sen (63%) and 64 sen per share. in 2010). (74.4%) respectively. Delisted on 28 Dec, 2012 Re-listing RPTs and sale of assets to April 30, 2010 Astro All Asia Taken private by Astro Holdings Sdn Bhd at Relisted as Astro Malaysia Holdings Bhd on Sept, 2012 at Networks PLC cash offer of RM4.30 per share. Delisted on IPO price of RM3 per share but excluded its overseas related parties at discount 14 June 2010. operations and deemed to be richly valued. Related party transactions (RPTs) are May 3, 2007 Maxis Bhd Maxis Communications Bhd was taken Re-listed as Maxis Bhd on 19 Nov 2009 at IPO price of RM5 common with many companies where private by Binariang GSM Sdn Bhd at cash for institutions and RM4.75 for retail investors. Relisted only they seek shareholders’ approval. offer of RM15.60 per share Malaysian teleco assets whereas the privatisation included international assets. At RM5 per share, this will value the However, on further scrutiny, some Malaysian operations at RM37.7 bil. When Maxis was RPTs are frowned upon especially when privatised, the company’s market capitalisation stood at it is believed that the best value was not RM39 bil. extracted. Sept 19, 2002 Bumi Armada Objektif Bersatu Sdn Bhd made cash offer of Relisted in June 2011 at IPO retail price of RM3.15 per share. Bhd RM7 per share. Delisted on 18 April 2003. It was taken private with a price earning ratio (PE) of For example, Bandar Raya Devel- under four times on a forward earnings basis in 2003. After opments Bhd’s sale of its assets and nearly a decade, it was re-listed last year at a PE of about 20 times despite more dilution due to an ESOS scheme. liabilities to Ambang Sehati Sdn Bhd for Related Party Pan Malaysia Malayan United Industries Bhd (MUI) borrowed MUI issued ICULS to PM Corp. Shares of MUI, which has RM914 mil did not go down well with Transactions Corp Bhd RM1.07 bil from related party Pan Malaysia Corp been making huge losses, were trading at 18.5 sen. minorities as the asset sale should be (PM Corp). opened up to other parties in order to Malaysian Pacific MP Corp borrowed money from companies Was loaned at high interest charges of 14% secure the best price. Corp Bhd controlled by Bill Ch’ng @ Ch’ng Chong Poh, (MP Corp) the controlling shareholder and chief executive Ambang Sehati is 26%-controlled by officer and his family, to fund its operations. BRDB chairman Datuk Mohamed Moiz Injection of assets 2009 MMC Corp Bhd MMC acquired Senai Airport Terminal Services Tan Sri Syed Mokhtar Albukhary is the majority shareholder Jabir Mohamed Ali Moiz, who also has at inflated prices Sdn Bhd (SATS) for RM1.95bil. of MMC and is stated in its announcement as “connected” an 18.8% stake in BRDB. to substantial shareholders of SATS. The price valued the airport terminal at RM600mil and its Another way to hoodwink minorities land at RM1.35bil while their net tangible assets totalled just and even the authorities is to break up RM64.4mil. an asset and dispose of it to friendly par- Sales of assets Bandar Raya Ambang Sehati Sdn Bhd acquired BRDB assets Asset sale should be opened up to other parties in order to at below Developments and liabilities in a deal valued at RM914 mil. secure the best price ties at a low price on a staggered basis to market price Bhd Ambang Sehati is 26%-controlled by BRDB’s Shares/warrants placement to related parties at discounted avoid seeking mandatory approvals. chairman Datuk Mohamed Moiz Jabir Mohamed prices Ali Moiz, who also has an 18.8% stake in BRDB. Feb 8, 2013 SP Setia Bhd Private placement of 321 million shares Was placed at huge discount and dilutes shareholding. Warrant/share placement (15% of the outstanding shares) at RM 2.94 Permodalan Nasional Bhd, had earlier made a general offer at a discount per share, a 7% discount to the market price. for SP Setia’s shares at RM3.95. Share or warrant placement at a dis- Long Term Incentive Plan of options and grants, up to 15% of the outstanding shares. count is probably a common phenome- non. However, it raises eyebrows if this is done at huge discount and dilutes shareholding as well. represented a discount of 35.71% and tention to take the company private via no indication in the announcement as to In the case of SP Setia Bhd, the prop- 38.36% to the range of equity valuation a SCR and repayment exercise at 65 sen what would happen to the residual as- erty developer made a private placement of Emas Kiara of 70 sen and 73 sen based per share, which is a 13 sen or 16.66% sets in KSK post the disposal of KIMB,” of 321 mil shares or 15% of its outstand- on the discounted dividend valuation. discount to KSK’s latest reported price- it says. ing shares at a near historical low price It said the price is also at a discount to-book value of 78 sen per share. The remaining assets in the company of RM2.94 a share or 7% discount to the to the net asset per share and net cash Kua, who holds a 51.38% stake in the are the cash from the disposal, a lease- market price then. per share of 93 sen and 57 sen respec- company, would need about RM474.05 hold property acquired through the pro- Prior to this, Permodalan Nasional tively based on the latest unaudited mil to acquire the remaining KSK shares ceeds and its investments in Indonesia Bhd made a general offer for SP Setia’s consolidated financial statement for the he does not own. and Thailand which are involved in the shares at RM3.95, where independent financial year ended Dec 31, 2012, even The company says the offer at 65 underwriting general insurance. adviser AmInvest stated the price was though the offer price was at a premium sen per share was arrived at based on According to an analyst, by taking the not fair and not reasonable. How is to its market price over the past 12 the unaudited net assets of KSK and its company private, Kua would be able to it that placing out shares to selected months. subsidiaries of 66 sen as at Dec 31, 2012, acquire new businesses not related to parties at RM2.94 a fair move to minor- The independent adviser said the of- after adjusting RM175 mil which are insurance without the hassle of regula- ity shareholders as they face dilution of fer is not reasonable, particularly given held under escrow accounts pursuant tory compliance. Essentially, minority Tan Sri Liew Kee some 32%. the favourable outlook and prospects of to the agreed terms of the disposal of its shareholders would probably lose out as Sin, president and While share placements are limited the Malaysian economy, construction core business, Kurnia Insurans (Malay- they will not be able to participate in the CEO of SP Setia to 10% of a company’s paid-up capital, industry and the company. sia) Bhd (KIMB) to AmG Insurance Bhd. potential growth of the company once there is no limit on warrants. Therefore, The company has extended its offer Of the RM175 mil, RM100 mil will taken private. the controlling shareholder can make a period to May 10 from April 23 after be held in the escrow account for six Is this yet another case of a major warrant placement to friendly parties at receiving acceptances of only 2.09%, years to meet any potential claims losses owner and its partners muscling out the huge discounts to effectively increase his bringing the total to 50.86% as at made by KIMB under a reinsurance minorities from a profitable long-term stake in the company. April 19. agreement entered into between KIMB future? The recent developments reveal a and a reinsurer. Notably, a search (refer to table maturing corporate scene whereby KSK Group Bhd An independent advice circular will on Performance of companies taken rising minority shareholder activism Another company that has announced be issued in due course. Meanwhile TA private) revealed some companies will somewhat deter companies from its intention to take the company pri- Securities is not entirely surprised by the which performed well after being taken taking advantage of the minorities. Mi- vate is cash-rich KSK Group Bhd after move given that the company does not private. nority shareholders must stay vigilant divesting its general insurance business have any core business post-disposal. and keep abreast of the developments last year. “Our previous target price of 64 sen is Relisting exercises of the company as there are growing On March 27, its major shareholder close to the proposed capital repayment Similarly, there is a growing number of innovative ways to short-change Tan Sri Kua Sian Kooi announced his in- of 65 sen. However, note that there was previously-listed companies that are them. FocusM Sept 21-27, 2013 10 lead The long and winding wall M'sian firms facing tough environment, with some exiting Chinese operations in last two years

T’S getting tougher doing busi- lenging market as demand and prices ness in China. The world’s second- ease. The property developer opened a largest economy is reining in its representative office in Shanghai last high growth and cooling down its February to expand its reach in China. property market. This is not surprising given the Inevitably, a number of Malay- country continues to cool its property sian companies with businesses market by tightening bank loans, in China are facing a tough operating by DOREEN restricting purchases of multiple prop- I LEONG environment, and some have opted erties and the imposition of higher to exit their Chinese operations in the downpayments. last two years. Among them are GHL Foreign-owned companies are also Systems Bhd, LBS Bina Group Bhd and quick to exit China. Goldman Sachs more recently Salcon Bhd. launched the sale of about US$1.1 bil Salcon is disposing of nine water in Hong Kong-traded shares in the and wastewater treatment plants in Industrial and Commercial Bank of China. Its executive director Datuk China, offering to sell its entire remain- Eddy Leong tells FocusM that its exit ing stake in the world’s biggest bank by stems from the challenging operating market value. environment in China. Carrefour SA, the world’s sec- “In order to grow, we need to buy ond-largest retailer, is reported to be more water assets in China but our exploring the sale of its businesses in resources are getting thin. We are China and Taiwan, including a possible not with deep pockets like govern- initial public offering in Hong Kong or ment-linked companies. The local a combination of some of those assets parties are much stronger financially with another company. now and foreign companies are not In Salcon’s case, the water and able to compete, as preference will be wastewater engineering company on for local companies to acquire these Sept 12 announced its plans to hive off assets in the country. its entire water assets in China to Hong “Some of these local major water Kong-listed Beijing Enterprises Water players enjoy about three to five times Group Ltd (BEWG) for a total of 955 lower cost of funds compared to ours mil yuan (RM518.3 mil). and in this aspect we are losing out in Upon completion, the proposed terms of yields. It would be better for disposal will generate total cash of us to put our money in property devel- We have scheduled ed a RM26 mil loss for the financial RM284 mil (after netting off bor- opment, where we can get a minimum tariff hikes every three year ended Dec 31, 2011 in the China rowings of RM102 mil) and disposal of 20% return on investments in three unit as well as a write-down in the value gains of about RM94.6 mil. The deal is to four years.” years. The challenge of some of its assets. GHL wants to fo- expected to be completed by year’s end Last year, GHL Systems Bhd, an comes when the government cus on Asean countries, after irregular and shareholders can expect a windfall, end-to-end payment services enabler, transactions in the China operations as Salcon is reported to be considering cut its losses when it exited its China changes and it will take longer led to substantial losses. a capital repayment with the cash operations. The company was back in than three years to obtain the Meanwhile, Mah Sing Group Bhd proceeds from the disposal. the black with a net profit of RM4.4 approval for these hikes.” prefers to adopt a wait-and-see atti- Similarly, soon after property de- mil for the financial year ended Dec – LEONG tude in the country following the chal- veloper LBS completed its divestment 31, 2012 versus a RM26 mil net loss of Chinese assets in July, it declared a the previous year. GHL executive special dividend of eight sen per share vice-chairman Simon Loh Wee as it had received HK$500 mil from the Hian is believed to be the man disposal. behind the company. The payment of the special The company post- dividend is from the proceeds of the disposal, allocated as general working capital. LBS shareholders on July 19 approved the disposal of its entire interest in the Lakewood Golf Club and Zhuhai Develop- ment Land to Zhuhai Holdings Investment Group Limited for HK$1.65 bil in a cash and share-swap deal. LBS owns 16.8% of Zhuhai Holdings, making it the second-largest share- holder of the Hong Sept 21-27, 2013 FocusM lead 11

Kong-listed entity. nature of his interest was declared with LBS decided to profit from its necessary approvals obtained. investments in China in April last year. Salcon formalised its partnership Both parties had been in talks since with Eco World when the latter took early 2010 regarding LBS’ assets in over Kembar Makmur Sdn Bhd, which Zhuhai, China. LBS intends to focus owns 49.99% of Nusantara Megajuta on expanding its property activities in Sdn Bhd, with the balance held by Johor. LBS realised an estimated profit Salcon. of RM309.3 mil, which will improve The venture between Salcon and Eco cashflow and earnings. LBS managing World will see both parties developing director Datuk Lim Hock San is the son a RM1 bil property project in Johor. of founder Datuk Seri Lim Bock Seng. Eventually, property development Likewise, Salcon’s proposed disposal will make up between 60% and 70% of of its utilities plants in China is to beef Salcon’s income. up its financial position to undertake more property development in Other Malaysian water Malaysia. Assuming Salcon pays a concession players in China special dividend from its sales proceeds While Salcon closes its chapter in allocated for working capital purposes China, Puncak Niaga Holdings Bhd and amounting to RM20 mil, shareholders Ranhill Bhd are keen to expand their will probably get three sen per share presence in the water and wastewater based on a share capital of 600.48 projects there. million shares. This is double its annual Although Puncak Niaga’s water dividend per share of 1.5 sen. Salcon concession operations in China have executive deputy chairman Tan Sri yet to turn around, the company is Tee Tiam Lee is believed to be the key actively exploring new investments decision-maker in the company. He has Changle Wastewater Treatment Plant in Changle County, Shandong Province in other provinces in China. Puncak a direct stake of 5.5% in Salcon. Niaga entered the China market What is perhaps perplexing is why HK$2.97 a day earlier. The counter con- at around RM166 mil. in 2008 via its 80%-owned Salcon decided to exit its water busi- tinued its good run the following day, On the other hand, subsidiary Sino Water Pte Ltd, nesses in China when many companies adding on four sen to close at HK$3.25; the Malaysian revenue a company incorporated in Sin- are riding on the huge growth potential but it has since trended downwards. It contribution fell to gapore which focuses primarily of the country’s 1.3 billion population. closed at HK$3.13 on Sept 18. RM156.41 mil in FY2012 on potential markets in China. On the back of growth prospects in When asked if this contrasting from RM288.63 mil a Puncak Niaga on Dec 15, 2010 the Chinese economy, where treated trend would translate to the deal’s year earlier. further increased its stake in water demand is projected to reach not being in Salcon’s favour, Leong Overall, the water Sino Water to 98.65%. 2,280,274 million litres per day (MLD) dismisses the notion. concession business Another water and wastewater by 2050, according to Frost & Sullivan, “We saw an opportunity when generated RM185.9 mil player, Ranhill, has been expand- and the anticipated scarcity in water BEWG wanted to acquire our assets, in revenue or 55% of ing its water assets outside Malay- supplies, many companies are already as it is a substantial company with a Salcon’s total revenue sia, particularly in China. Its chief planning to tap into the huge oppor- strong relationship with the Chinese in FY2012 and a net executive officer Tan Sri Hamdan tunity. government. We believe BEWG will be profit of RM39.1 mil, an Mohamad has previously said it The wastewater treatment sector in able to generate better returns from increase of 86% over the hoped to boost water treatment China is significantly underserved and the water assets.” previous year. Datuk Lim Hock San, managing capacity in China to 1,000 MLD in presents great growth potential, espe- BEWG is a major water treatment Leong says for the director of LBS Bina. LBS completed its the next five years, with potential cially for foreign players with advanced player in China and has been buying current financial year, divestment of Chinese assets in July annual revenue of RM500 mil and technology and equipment. China has water assets in the country. It has the company will see profits of RM150 mil. allocated RMB430 bil for investment owned and operated over 90 water extraordinary profits due Currently, the company oper- in this sector between 2011 and 2015. supply plants and water sewage treat- to the sale of the Chinese ates five water and wastewater ment plants in Beijing, Guangdong, assets and concedes that treatment plants there, with a Surprising move Zhejiang, Shandong, Anhui, Hunan, it will have to make up combined capacity of 270 MLD. Hence, Salcon’s move to exit China is Sichuan, Guangxi, Hainan, Guizhou for the loss of consistent Last year, its business in China surprising considering that the com- and Yunnan provinces with an actual revenue and income from generated RM150 mil in revenue pany expanded its concession portfolio water treatment capacity of over 10 its water business. for the group. by acquiring two water assets just last million tonnes per day. Will shareholders ex- Ranhill was supposed to year and stated that it would continue BEWG’s presence in Malaysia is via pect Salcon to see poorer expand its water concession busi- to focus on increasing its concession the construction of the Pantai waste- results in FY2014? Leong ness with funds from its planned assets there. water treatment plant. is optimistic the company Iisting exercise in July. However, The acquisition of the two water Affin Investment Research reckons will be able to mitigate a Ranhill has been expanding its water the company expansion plans assets is estimated to generate total Salcon’s share of the disposal consid- decline, as its current con- assets outside Malaysia, particularly will probably take a back seat revenues of 1.7 bil yuan (RM842.52 eration of RM386.8 mil for its Chinese struction and property in China. Its CEO Tan Sri Hamdan following its shelved initial public Mohamad said its water treatment mil) throughout the entire concession water assets looks fair, which works businesses will pick up at operations have potential annual offering recently. periods. out at about 7% below its estimated a faster rate. revenue of RM500 mil and profit of Ranhill’s venture in China was Leong says it is also challenging revised net asset value (RNAV) of “FY2014 will probably RM150 mil in 2005, with its joint-venture dealing with local authorities, which in- RM413.8 mil. be a bit slow but it will be partner Pinang Water Ltd, for cludes securing approval for scheduled “Incorporating the implied disposal temporary. We are not the construction of a 100MLD tariff hikes. “We have scheduled tariff consideration as well as the value worried as we are growing potable water treatment plant hikes every three years. The challenge enhancement from the Johor Bahru our other businesses,” in Jiangxi province’s Yichun city. comes when the government changes project and assuming a full conversion Leong says. Ranhill’s other water projects and it will take longer than three years of all the outstanding warrants, we are in Sri Gading in Johor, the to obtain the approval for these hikes,” peg Salcon’s RNAV and a higher price Related party Amata Nakorn Industrial Park he explains. target of 87 sen from 80 sen previously. transaction in Thailand and Madinah city in However, the news of Salcon’s exit At the current price, we maintain our Salcon recently tied up Saudi Arabia. from China operations did not sit well buy rating on the stock,” the research with Eco World Develop- China has been the favourite with its shareholders. The share price house says in its note. ment Sdn Bhd, a company hunting ground when the world’s of the counter fell two sen to close at 67 The disposal of the Chinese water linked to SP Setia Bhd’s most populous nation opened its sen on Sept 13 and continued slipping assets will dilute the revenue and profit Tan Sri Liew Kee Sin. doors to foreign investors. It is to close at 65.5 sen on Sept 18. The contribution to the group. Based on Coincidentally Leong, the world’s fastest-growing major stock reached a year’s high of 72.5 its financial year ended Dec 31, 2012, who has worked for SP Setia for over economy, with average growth rates of Tan Sri Rozali Ismail, sen on Aug 19, from a low of 39.5 revenue contributions from China 13 years, is also a shareholder of Eco CEO of Puncak 10% over the past 30 years. sen on Feb 26. operations accounted for 48.6% of World via Maple Quay Sdn Bhd, which Niaga. Although There is no denying that in the In contrast, BEWG’s Salcon’s total revenue of RM340.81 holds a 50% stake. Leong is Salcon’s Puncak Niaga’s foreseeable future, China may not see share price surged 8.1% mil. This revenue contribution from single-largest shareholder with 12.5%, water concession the double-digit growth rates that it to HK$3.21 on China is an increase from 35% a year and he also holds a 50% stake in Maple operations in China has been enjoying. That said, there’s no have yet to turn Sept 13, from earlier as the company’s revenue Quay. around, it is actively doubt that China’s economy will be the declined from RM472.46 mil, while This raises the question of corporate exploring new one to watch in the coming decades – contributions from China operations governance in terms of being a related investments in other and let’s hope Malaysian companies do remain relatively unchanged party transaction but Leong says the provinces in China not miss this opportunity. 10 FOCUSM lead DEC 7-13, 2013

in turn is held by his family’s private vehicle, Kuok Brothers Sdn Bhd, with 60%; while the balance is held by the listed PPB Group Bhd. Kuok stirs interest The government’s investment arm, Khazanah Nasional, holds the remain- ust two weeks before the 13th general election on May 5 this year, Ma- ing 30% in the JV. Southern Marina acquired the two laysia’s richest man, Robert Kuok, invested nearly RM200 mil in prime pieces of land in Puteri Harbour from land in Iskandar Malaysia, Johor Bahru. The timing of the tycoon’s UEM Land Holdings Bhd to build high- move was not lost on political observers. While most businessmen were rise residential, retail and commercial adopting a wait-and-see attitude, given expectations of the most keen- units totalling RM1 bil in gross devel- ly-contested election ever, Kuok’s commitment was seen as a stamp of approval opment value. J This is certainly a sweet deal for for the government. BLOOMBERG UEM Land, which bought the land in It was not a one-off move. In the mid-1990s for about RM1.8 mil October, Kuok donated RM100 mil via its subsidiary, Bandar Nusajaya to helping set up Xiamen University’s Development Sdn Bhd. The land dis- campus in Selangor. His commitment posal will bring some RM108 mil in was made during Chinese President Xi gross profit for UEM Land’s financial Jinping’s visit to Malaysia. year ending Dec 31, 2013. It was a rare public appearance in In addition, analysts believe Malaysia by the ageing but still-active Kuok’s project in Puteri Harbour will businessman. And just in case his accelerate development momentum detractors were saying he has been in- in the area. different to his homeland, he declared Apart from his investments, Kuok in a press interview that “I haven’t lost was instrumental in influencing an- PPB Group’s core businesses include my affection for Malaysia”. other mogul, his business partner Lang livestock farming, food processing and production of baked goods That statement started specula- Walker, to invest in Iskandar Malaysia. tion as to the tycoon’s next move in The Australian billionaire then Malaysia and if he would step up his set his sights on Senibong Cove for a was deserting Malaysia arose when investments here. In March, he had US$1.3 bil project with Iskandar Wa- he shifted the headquarters of his upped his stake in his listed hotel terfront Sdn Bhd; the project includes flagship plantation entity PPB Oil flagship Shangri-La from 52.78% to building condominiums, cluster Palms Bhd from Malaysia to Singapore 74.98%. Indeed, there is talk that Kuok homes, semi-detached bungalows and and injected the business into Wilmar is eyeing more land and is planning to terrace houses on the 84ha of water- International Ltd in 2006. expand Shangri-La’s operations. front site over 10 years. Such talk intensified in 2009 when His stakes in his three listed compa- By bringing billions in investment “Sugar King” Kuok sold his sugar nies alone are worth RM12.3 bil. to Malaysia – directly and indirectly – interests to Felda for RM1.25 bil after “He has always been committed Kuok is seen as a catalyst to fast-track four decades in the business. He had to Malaysia. In fact, Malaysia owes developments, especially in Johor. set up Malayan Sugar Manufacturing him a lot. Don’t forget he was in MSA But detractors say Kuok has not Sdn Bhd (MSM) in 1958 and had his (Malaysia-Singapore Airlines, which done enough and has deserted the first sugar cane plantation under Perlis later split to become Malaysia Airlines country, although the tycoon has Plantations. and Singapore Airlines), and pioneered assisted when the country experienced However, just months after selling MISC (Malaysia International Ship- financial difficulty. his Malaysian sugar business, Kuok ping Corporation Bhd). He helped Kuok moved his corporate head- was quick to regain his foothold develop and grow the local economy in Kuok’s success is due to having good, trusted, honest and quarters to Hong Kong from Kuala in the sugar business by acquiring sugar, rice, flour and plantations in the long-serving employees, and not so much to having his family Lumpur in 1975, reportedly due to his Sydney-based CSR Ltd’s sugar and early days,” says a close Kuok associate. members peppered throughout his business empire distaste for the New Economic Policy renewable energy unit, Sucrogen Ltd, It is said the government requested (1971-1990). for A$1.75 bil. The deal gave him con- Kuok’s father’s help to set up the The perception that Kuok, who has trol over half of Australia’s raw sugar then-Malayan Airways Ltd in 1946. not actively invested domestically output. In the 1960s, the airline was based since the 1990s, Kuok Group operates through three in Raffles Place, Singapore. In 1965, main holding companies. Kuok (Singa- Borneo Airways was amalgamated with Malaysian Airways and led the formation of Malaysia-Singapore by Doreen Leong Airlines, later Malaysia Airlines. Likewise, when the local shipping industry was in a vacuum, Kuok was invited by the government to assist in establishing a national maritime ship- ping industry, hence MISC in 1968. It appears the government was still in need of Kuok when Prime Minister Datuk Seri Najib Razak and Khazanah photos by DD Hoe Nasional Bhd “broached” the idea of him investing in Iskandar Malaysia. While a personal invitation from the prime minister to take a slice of the property in Johor may have played a part in persuading Kuok to invest, it has to be a sound business decision for the tycoon. Says an analyst: “Johor-born Kuok probably wants to have a piece of the growing property business in Nusa- jaya, Johor, and will likely scout for more land to strengthen his property business. “For Kuok to pay such a high price, of about RM334 per sq ft, for the 5.06ha plot in Puteri Harbour, the billionaire will want to make the investment worthwhile,” he adds. Interest in the hotel Kuok’s re-entry to Johor is via counter Shangri-La surged in March joint-venture unit Southern Marina when Kuok Brothers Development Sdn Bhd, 70% held by upped its stake to Huge Quest Realty Sdn Bhd, which 74.98% from 52.78% DEC 7-13, 2013 lead FOCUSM 11

Robert Kuok’s Business Empire in Malaysia Robert Kuok Business Empire Malaysia

Robert Kuok

Shangri-La Asia Ltd Inline Ltd Canico Investments Ltd PPB Group Bhd Kerry Holdings Ltd Kerry 1989 (CI) Ltd Kerry Group Ltd Kuok Brothers S/B Kuok (Singapore) Ltd Kuok Brothers S/B Kerry Group Ltd Kerry Holdings Ltd

100%

Pacific Carriers Ltd Kuok Foundation Bhd Hoopersville Ltd Trinity Coral S/B

41.41% 0.83% 17.16% Ophir Holdings Bhd Transmile Group Bhd Delisted May 19, 2011

34.46% 50.18% 1.44% 22.33% 52.78%74.98%

Malaysian Bulk Shangri-La Hotels PPB Group has a 22.3% stake in Shangri-La Hotels PPB Group Bhd Carriers Bhd 14% 0.5% 0.8% (Malaysia) Bhd an 80% stake in (Malaysia) Bhd. Collectively, the Kuok 100% FFM Group, which owns and operates family has a 48.5% stake in Malaysian Bulk Carriers Bhd. Kuok Brothers’ JAB Capital Bhd* five flour mills in Delisted Jan 26, 2012 Malaysia and one stakes in the three listed companies in each in Vietnam, Malaysia were worth about RM12.3 bil pore) Ltd is the holding company for had limited price increases for edible RM1.01 bil for the financial year ended Thailand and as of Dec 4. Note: Formerly Jerneh Asia Bhd Indonesia theSource: Kuok Annual Group’s Reports, operations CCM Filings in Singa- oils during most of 2011 and part Dec 31, 2012, from RM1.17 bil the Kuok Brothers also has a 17.16% pore. The other two holding companies of 2012, while the rising cost of raw year before, despite having registered stake in now delisted Transmile Group are Kuok Brothers Sdn Bhd in Malaysia materials put a dent on margins. a higher revenue of RM3.57 bil versus Bhd, via its 51%-owned Trinity Coral and Kerry Holdings Ltd in Hong Kong. RM3.19 bil. Sdn Bhd; while it held a 36.5% stake in From its established trading bases Interests in Malaysia worth RM12.3 bil Kuok Brothers has interests in over Jerneh Asia Bhd before the company in Malaysia and Singapore, Kuok As for Kuok Brothers, the company 30 companies in Malaysia, notably a was delisted in January 2012. Group expanded its operations in the posted a 13.3% drop in net profit to 50.2% stake in PPB Group Bhd and  Continues on page 12 1950s and 1960s to Thailand and In- donesia. Hong Kong and China became the focus of further regional expansion in the 1970s and 1980s. In 1974, Kerry Holdings Ltd was established in Hong Tycoon with a big heart Kong. The name “Kerry” has since been BEING Malaysia’s richest man with a net worth get, through his philanthropic work via Kuok and scholarships. Every year, between 400 identified with Kuok Group’s extensive of US$12.5 bil, Robert Kuok Hock Nien is also Foundation, which was set up in 1970. and 450 of the foundation’s undergraduate operations in Hong Kong and China. a tycoon with a big heart. The charitable organisation aims to awardees study in universities in the Klang Nevertheless, his family enterprises Kuok was quoted as saying: “Wealth provide scholarships for Malaysian youth Valley. are seeking to recover from some sharp should be used for two main purposes. to enable them to study and work in their In 1976, the FFM Chair in Biochemical share-price and profit declines in a One: for the generation of greater wealth; in areas of expertise. From its inception, the Engineering was established three years tumultuous 2012. other words, you continue to invest, creating Kuok Foundation has given thousands of after the first MSM Professorial Chair in Food For instance, Wilmar’s shares prosperity and jobs in the country. Two: scholarships to students throughout the Technology, which are named after the Kuok plummeted 33%, making it the worst part of your wealth should be applied to the country. Group of companies. performer of Singapore’s Straits Times betterment of mankind, either by acts of pure The foundation provides special support FFM donated RM1 mil and MSM gave Index (FSSTI) last year. However, the philanthropy or by investment in research and to rural schools on top of generous donations RM600,000 as endowment funds to promote counter rebounded early this year. development along the frontiers of science, towards the building and development of scientific research and teaching. Wilmar’s woes stem from its mas- space, healthcare and so forth.” schools and institutions of higher learning. In 2006, these chairs were converted sive exposure to China, as about 48% It is said that Kuok’s communist Kuok is also said to have set up Ophir into research grants and another grant of of its revenue comes from sales of its revolutionary brother, William, who sacrificed Holdings Bhd whose role included assisting RM260,000 was given in 2010 to fund research cooking oil brands – led by Jin Long Yu, his life trying to help the underprivileged, was bumiputera staff working in his companies in on “Anti-Chikungunya Virus Susceptibility meaning Golden Dragon Fish. Beijing one of his biggest influences in life. Malaysia and Singapore. Testing Using Local Natural Resources” at His devoutly Buddhist mother had Records show that Kuok Foundation Universiti Tunku Abdul Rahman. Under the drummed into the the minds of her children Bhd owns 41.4% in Ophir while Koperasi Academy of Medicine of Malaysia, a yearly the values of honesty, of never cheating, Polis Diraja Malaysia Bhd has 11.4%. Other research grant is awarded to Malaysian lying, stealing or envying other people their substantial shareholders include Datuk Musa doctors for medical research under the Tun material wealth or physical attributes. As @ Ayob Saad with 9.5%, Getawira Sdn Abdul Razak Research Award, to promote such, Kuok believes in being humble, Bhd, based at the same building as Kuok medical research in Malaysia. honest and not take advantage of Foundation, with 8.7%. Kuok also donated US$50 mil through people. Notably, during the takeover of Jerneh Asia Kerry Group in 2005 to the Hope Project, The world’s sugar king is a man Bhd in 2011, Ophir was one of the parties a national charity in China helping school who has been active in charity work, acting in concert with Kuok Brothers Sdn Bhd. dropouts in poor areas to return to their especially in the development of Ophir is an unlisted bumiputera company studies. education, throughout his life. incorporated in 1976 with more than 350 Besides education, the foundation also He received his early education in shareholders. The company is in engineering provides funding for social and welfare an English school and later enrolled and supply of machinery, fleet business, activities. Donations made are in support of in the Raffles College in Singapore specialised equipment supplier to government welfare homes for abandoned and neglected with Lee Kuan Yew, who later agencies, and oil and gas industry. children and old folks; shelters for abused became Singapore’s first prime The company posted a net profit of RM14.6 women and children; support to the blind, minister, as one of his school mil for the financial year ended Dec 31, 2011 deaf, sick and underprivileged; rehabilitation mates. Kuok had a short working on the back of RM28 mil revenue. It paid a net centres for disabled persons; as well as non- stint with Japanese company dividend of RM18.7 mil in FY11. profit outfits for hospitals and health centres. Mitsubishi after his studies in More recently, the Malaysian billionaire The foundation also assists victims of natural Raffles were halted due to the philanthropist had agreed to donate RM100 mil disasters when the need arises. Japanese invasion, before to the Malaysian campus of Xiamen University. Kuok Foundation also contributes towards helping his father in his trading Kuok Foundation budgets close to 1,500 medical and surgical facilities and services; business. study awards per year amounting to annual support schemes for alleviating human Because of his life disbursements of some RM16 mil, not suffering and treatment of sickness and experiences, Kuok ensures including another 160 study grants in the area diseases; aid and relief to the poor and needy; that he gives the next of vocational training. and support for institutions for health, sporting generation the opportunity From 1970 to 2012, the foundation and recreational activities as well as hospitals that he was unable to disbursed RM201 mil for study loans, grants and sanatoriums. – by Stephanie Ting 12 FOCUSM lead DEC 7-13, 2013

Guided by a simple business philosophy Kuok’s career  From page 10 RM4.11 on March 20. The counter closed at “This could be because he has access to milestones Kuok Brothers’ flagship company PPB RM6.68 on Dec 4. top leaders and corporate chiefs and thus Group’s core businesses are flour, animal The hotel and resorts group posted a has first-hand information. He is humble  1942 feed milling and grains trading as well as well higher net profit of RM62.6 mil for the nine and is able to recall your name after having Works in Mitsubishi, which had a monopoly on rice imports into as downstream activities including livestock months ended Sept 30, from RM56.9 mil a met you only once.” Johor where Kuok heads the rice farming, food processing and a bakery. year ago, on the back of an increased revenue Unsurprisingly for a nonagenarian bil- department PPB Group has a 80% stake in FFM of RM379.5 mil. The better performance lionaire, family members play a significant Group, which owns and operates five flour was due to improved results at its Rasa Ria role in ensuring the continuity of Kuok’s  1949 mills in the country and one each in Viet- Resort as well as increased occupancy at the empire. But it is equally crucial to have Founded Kuok Brothers Sdn Bhd nam, Thailand and Indonesia. PPB is also the Shangri-La Hotel KL. trusted lieutenants. together with his two brothers; single largest shareholder, with an 18.3% Meanwhile, Kuok’s Kerry Group is in “Kuok’s success is due to having good, company involved in trading interest, in Wilmar, which operates in more the midst of an initial public offering on trusted, honest and long-serving employees, agricultural commodities than 20 countries across four continents the Hong Kong Stock Exchange for its and not so much to having his family mem- and has over 450 manufacturing plants. Kerry Logistics Networks and hopes to bers peppered across his business empire.  1953 The diversified group posted an improved raise between US$245 mil and US$284 mil, He values honesty and integrity,” says a close Expands into Singapore, setting up a performance with a higher net profit of according to reports. associate. branch of Kuok Brothers Sdn Bhd RM713.5 mil for the nine months ended However, investors are concerned about Sept 30, 2013, from RM536.1 mil the year Trusted lieutenants feuds that have split the second generation before, on the back of a higher revenue of Having built his business empire into one of of some prominent families. Although Kuok  1959 RM2.4 bil. Asia’s most diversified conglomerates, peo- has apparently not decided which of his Establishes a sugar refining business in Malaysia When Kuok Brothers upped its stake ple close to Kuok say his success boils down progeny will eventually take control, people in Shangri-La to 74.98% from 52.78%, it to his ability to decide based on gut feel. who know him are not concerned as Kuok prompted speculation of an offer for out- “When he evaluates a business proposal, has instilled his business philosophy in the  1961 standing shares. he goes by gut feel. He may stop a business family. Makes one of his early major breaks Kuok Brothers bought a 22.2% stake or presentation by his staff halfway through Kuok’s business philosophy is simple. buying Indian sugar cheap just before prices shoot up, making huge profits 98 million shares in Shangri-La from Stand- when not convinced by the arguments and “Don’t step on other people to make your ard Chartered Private Equity Ltd on March decide based on his gut feel. Often, he is money. Work hard and lead a simple life,” 20. The shares gained nearly 5%, to close at later proven right. says his close associate.  1971 Opens first Shangri-La hotel in Singapore

It’s family business for Robert Kuok  1974 Establishes Kerry Holdings in Hong AT age 90, Malaysia’s richest man Robert Kuok Kong Hock Nien has yet to show signs of slowing down. While he officially resigned as chairman  1977 of his flagship Hong Kong-based Kerry Group Acquires land on the Tsim Sha in 1993, he is still very much involved in the Tsui East waterfront and builds the strategic management of his business empire Kowloon Shangri-La that spans Southeast Asia, Australia and Europe.  1984 Judging from the way he manages his Opens his first Shangri-La in China empire and from the type of business deals he involves himself in, the tycoon is likely a strong believer in the Chinese art of business dealing,  1985 guanxi. At its most basic, guanxi describes a Partners with China’s foreign trade personal connection between two people; trust ministry to begin building the China World Trade Centre in Beijing. The and honesty. From left: Kuok Khoon Chen, Kuok Hui Kwong and Kuok Khoon Ean project was completed in 2010 Kuok peppers his business empire with his following the construction of the China children, nephews, nieces and other trusted name from which Kuok drew inspiration for SCMP Group also owns part of Thailand’s World Trade Centre Tower 3 associates who help him keep a close eye on his flagship hotel chain, means an utopia or Post Publishing Pcl – the publisher of the things. Says a close business associate: “He imaginary remote paradise on earth, was first Bangkok Post, Thailand’s leading English  1993 has good lieutenants all over, it’s not true that featured in James Hilton’s 1933 novel, Lost daily. Kerry Group acquires a 34.9% stake he relies only on his family members.” Horizon. There has been much speculation over in the South China Morning Post from He still makes important business decisions Shangri-La is managed by eldest son which one of Kuok’s children will succeed him, Rupert Murdoch’s News Corporation in the many listed companies he controls. Khoon Chen, 58, who is the chairman and with most observers guessing between either “He’s so vital, so active, and continues to be CEO. Kuok’s second son, Khoon Ean, 57, of his two eldest sons eventually taking over the  2007 so personally powerful; I can’t imagine a day held the top post in Shangri-La until August helm. To this, Kuok has commented that the Consolidates all his oil palm without him at the top,” Timothy Dattels, a this year. Khoon Ean is now a non-executive leadership of his business empire is a serious plantation, edible oils, grains and director of Kuok’s Hong Kong-listed Shangri- director and is also said to be overseeing the matter and he will make the right decision related businesses under Wilmar La Asia Ltd, was quoted as saying earlier this other operations of the Kerry Group. at the right time. Ideally, the best candidate Group, making it Asia’s leading year. Today, Kuok’s Malaysian operations under for succession would be one who can learn agribusiness group Above all, the big question which remains Kuok Brothers Sdn Bhd are overseen by Khoon and emulate the entrepreneurial and trading unanswered is who will eventually rise to the Chen and Kuok’s niece Kuok Oon Kwong, who instincts honed by Kuok over the years.  2008 top and be trusted with continuing the legacy is the managing director of Shangri-La Hotels While the world focuses on his succession Kerry Group exits Kerry Beverages Ltd of Kuok’s empire. Kuok has said he isn’t Malaysia. plan, Kuok’s business empire traces its roots to after selling its remaining stake in the worried about when that day eventually comes. Wilmar International Ltd, the world’s largest the first business venture he and his siblings set Chinese bottling joint venture formed in 1993 with the Coca-Cola A firm believer in strong family values, Kuok palm oil processor and eighth-largest sugar up called Kuok Brothers Sdn Bhd. has trained all his eight children – from two producer, is run by Kuok’s nephew, Kuok Robert went on to build and grow the family wives – well and given them top executive Khoon Hong, 63, its chairman and CEO who business as his brother, the late Tan Sri Philip  2009 positions in his key businesses. co-founded the company in 1991. Wilmar Kuok, became the Malaysian ambassador to Disposes of his entire sugar business Overall, his other relatives also alone is credited with contributing a large Germany. Philip passed away in 2003. in Malaysia to Felda for RM1.25 bil sit on the boards of his many chunk of Kuok’s US$12.5 bil net worth Another brother who Kuok was deeply fond companies, both listed and today. of, William, joined the communist revolt and  May 2011 private. Kuok’s blue-eyed daughter, Hui was killed in 1953. Takes Singapore property firm, His flagship Shangri- Kwong, 35, runs Hong Kong- Kuok claims to never control his children Allgreen Properties Ltd, private in a La first opened its doors based South China Morning Post but simply trains them up with the sharp deal worth US$2.1 bil in 1971 with its first (SCMP) Group which publishes business skills he has developed. He says this hotel in Singapore. The the city-state’s most influential is important to maintain the continued growth  March 2013 English newspapers, the South of his empire which risks faltering should future Net worth of US$12.5 bil by Forbes; Kuok Khoon Hong China Morning Post and Sunday generations stray from the business philosophy maintains position as Malaysia’s Morning Post. Kuok took control of the Kuok has instilled in his family. richest person 109-year-old SCMP in 1993. To quote Kuok: “Everything on earth Hui Kwong graduated in East Asian is dynamic. I can only give my children a  April 2013 studies from Harvard University and started message, not money. If they follow it, we Purchases two parcels of land in her career within SCMP as a financial [my empire] can go on another three or four Iskandar Malaysia for RM182 mil journalist. generations.” – by Dinesh Immanuel 10 FOCUSM lead NOV 16-22, 2013 Vincent Tan still going strong N HIS 60th birthday in February last year, tycoon Tan Sri Vincent Tan Chee Yioun surprised the corporate world by announcing his retirement from Berjaya Corp Bhd (BCorp). At the same time, the founder of the Berjaya conglomerate said he was donating Ohalf his fortune to charity. Many were taken aback pany MOL Global Bhd. projects, they say it is by Tan’s retirement because Based on a post-IPO price of important for him, as the in Malaysia, 60 is a relatively US$40 per share, Tan’s stake in founder of the Berjaya young age at which to call it a Facebook is estimated to be worth group, to be there at day, at least among corporate US$140 mil. The counter is current- special functions. His chieftains. And before this ly trading at around US$49. presence means a lot to there had been no signs the With so much going for him, it the joint-venture partners. hands-on tycoon is hard to believe he is in Many tycoons have not was slowing down retirement. If anything, retired, even in their 80s,” or phasing in his he still puts in a full day’s he adds. exit. work, with a punishing Last September, Berjaya Now, more than schedule. Last month, Land Bhd (BLand) ven- 20 months later he had to call off a trip tured into its maiden hotel Tan, who handed to the US for the launch development in Japan, the over the running of eCosway’s tie-up with Four Seasons Hotel Kyoto, by Doreen Leong of Berjaya to his EPIC Era, due to pressing that has a gross develop- eldest son Datuk matters at home. ment cost of US$320 mil Robin Tan Yeong Ching, is “He’s not retiring from the (RM976 mil). still very much in the news, corporate world, he just stepped BLand’s wholly-owned with no sign of taking a down from BCorp,” says a BCorp subsidiary, Berjaya Kyoto back seat or fading into spokesperson to queries from Development Kabushiki the background. His latest FocusM. She points out that Kaisha, collaborated with public appearance was at the 7-Eleven, Cardiff City and his stake Four Seasons Hotel and Re- opening of a Cosway store at in Caring are privately held. sorts for the development. Alamanda, Putrajaya early According to insiders, Tan still BLand is a subsidiary of this month. travels extensively and attends local BCorp. The development of The Batu Pahat-born events when he is in town. Says a the luxury hotel is expected uber-businessman is also close friend: “Tycoons like him have to begin in the last quarter busy planning the listing to keep busy. He can’t be sitting in of 2014. of Berjaya Auto Bhd and retirement. He spends more than The Four Seasons Hotel 7-Eleven Bhd. In the pipeline half his time overseas. This week Kyoto is the group’s third are plans to list MOL Access alone, he is flying overseas twice. He major project in North Asia, Portal Bhd and U-Mobile Sdn is very involved in Cardiff and tries after its huge Integrated Bhd. Tan was in the news in to attend all its matches.” Resort Development in Jeju, the recent listing exercise of South Korea, and the Great the Caring Pharmacy Group, To many, Mall of China project in in which he has a 20.35% Hebei Province, China. substantial stake which he Tan is seen The gross development has since sold down to 17%. value of the Great Mall of There have also been as an asset China to date is estimated reports that he wants to trader. He will buy at HK$9.3 bil. The 30.75ha increase his shareholding project near the Beijing Inter- in his successful English if he thinks the national Airport consists of Premier League (EPL) prospects are good seven main adjoining blocks, Cardiff City Football Club housing modern leisure to 98% and is seeking to and sell if the price facilities in one commercial have it listed soon, perhaps is right.” landscape. in Singapore. Tan bought The construction of the a controlling stake in the first phase of the Great Mall Welsh outfit for RM600 A senior executive at BCorp of China, comprising three mil but is currently em- concurs that Tan spends most of his indoor theme parks and a broiled in a controversy time on his football club in Cardiff shopping mall, is scheduled with officials (see sidebar). and is always travelling abroad. He to be completed in the second If its listing materialis- pops back when he has to attend an quarter of 2014. es, Cardiff City will become event, especially when a minister Meanwhile, Berjaya’s resort the second EPL club to be is present such as at the launch of in Jeju Island comprises resort so in the last year, after Cosway Pharmacy in Putrajaya apartments, serviced residenc- Manchester United raised two weeks ago. For the record, Tan es, resort villas and a wellness £150 mil on the New York has listed companies not only in resort. Infrastructure work for Stock Exchange (NYSE) in Malaysia but also in Hong Kong, the 174.6ha site of the Jeju late 2012. Singapore and the Philippines. Resort Airest City has been Tan is also involved in “Tan is still a 40% shareholder of completed, while construction Berjaya’s huge projects, BCorp – the holding company for all of the first phase of the Got- such as its proposed its listed units. Definitely he has an jawal Village commenced in the world’s largest shopping interest to protect his investment third quarter of 2013. It will be mall in China, a RM3.5 bil in the group. Like any other con- open for sale by the second half holiday resort in South trolling shareholder, he wants to of 2014. The project will also Korea and the Four ensure that value is created and the feature a 500-room casino ho- Seasons Hotel Kyoto in group is heading in the right path,” tel, hotel residences, a shopping Japan. says another close associate. complex and an indoor arena. The Malaysian billion- “He is quite busy with his travel According to the close friend, aire has 3.5 million shares plans. To him, business is pleasure. Tan is also more involved in in Facebook, via his com- On his presence in many overseas charity now than before his NOV 16-22, 2013 lead FOCUSM 11

Vincent Tan’s career A magnate for controversy milestones TAN SRI VINCENT TAN is no stranger to 1968 – Starts work as a bank controversy. Managing a business empire with clerk and insurance salesman more than 30,000 employees and an array of 1973 – Becomes agency listed companies has its challenges. supervisor for American The latest hullabaloo Tan has stirred up International Assurance involves his Welsh football team, Cardiff City, in which he acquired a controlling stake in 2010 1982 – Brings McDonald’s when the Bluebirds were saddled with debt. franchise to Malaysia Recently, the British press did not hold 1984 – Establishes Berjaya Group its punches, calling Tan a “court jester” and accusing him of “boardroom buffoonery” when 1985 – Secures 70% stake in he reportedly undermined manager Malky Sports Toto; buys remaining Mackay and allegedly interfered with the team. stake in 1992. BGroup buys Bukit It is not surprising the Malaysian Tinggi Resort stake businessman’s Cardiff City tenure has been testing as he has no emotional attachment to 1993 – BGroup acquires Cosway football and no previous experience of running Tan caused an uproar among Cardiff City fans when he changed the team’s kit colour and crest Malaysia Sdn Bhd a football club. Tan also caused an uproar among Bluebird later increased the turnover and profits of the suggested in 1990, which became a political fans when he changed Cardiff’s kit colour gaming company. hot potato in the 1990 general election. from blue to red and incorporated a dragon in He ran into another brouhaha in 2010 The project – involving 360ha and including the club’s crest when it had always been the when it was reported he had obtained a proposals for two large hotels, a condominium exclusive habitat of the bluebird. licence to legalise sports betting, via Ascot as well as an “Acropolis” complex at the He also fuelled controversy when he sacked Sports Sdn Bhd. Tan’s monorail and sewerage summit, with shopping and sports centre, the club’s head of recruitment, Iain Moody, projects, among key privatisation exercises cinemas and night clubs; over 300 houses and replaced him with a 23-year-old from awarded based on direct negotiations, were and chalets; and a golf course – was scrapped 1994 – BGroup acquires Kenny Kazakhstan, Alisher Apsalyamov, who had mired in controversy and financial difficulty after having been rejected by the Environment Rogers Roasters’ franchise for reportedly attended the same Swiss finishing and eventually had to be rescued by the Department. Malaysia school as Tan’s son. government. In 1994, a Berjaya Group employee, Tony It is widely known that Tan’s business Tan also faced a challenge when his Yeong, allegedly offered a bribe to Joses 1995 – Partners with success in Malaysia is due largely to his gigantic Berjaya Times Square development Tuhanuku, Minister of Forests, the Environment Norway’s Telenor networking with powerful political figures. was almost abandoned when it was hit by and Conservation in the Solomons Islands. Group to set up His business breakthrough was bringing the the Asian financial crisis in 1997. The project, Tuhanuku was the first Solomon Islands Mutiara Swisscom McDonald’s franchise to Malaysia in 1982. which began in 1995 and was scheduled for politician to go public about attempted (now known as DiGi. He also caused a stir when he bought completion in 1999, was eventually completed corruption. Yeong was said to have resigned Com Bhd) Sports Toto in 1985, when the languishing in 2003. and left the country following the incident. 1998 – BGroup acquires franchise lottery agency was privatised by the There was also a public outcry over Tan’s Berjaya withdrew from the Solomons the for Starbucks Coffee government via a non-tender exercise. He proposed development of Penang Hill, following year. 2005 – BGroup launches MiTV (U Television Sdn Bhd) retirement announcement. job quite comfortably, including into unusual is that part of the donation was 2007 – BGroup acquires franchise He recently signed the Giving Pledge, the chairman’s post. I feel it may look in the form of loan stocks and shares in for Wendy’s Restaurants committing himself to donating half odd for the board to pick someone else a yet-to-be-listed company. his wealth during his lifetime. The for the chairman’s post now,” says the It was reported that the RM600 Giving Pledge was initiated in 2010 by senior executive. mil pledge includes 10-year irredeem- billionaire Bill Gates and wife Melinda, According to Tan’s close associate, able convertible unsecured loan stocks and philanthropist Warren Buffett, Robin, since taking over from his father, (ICULS) in BCorp valued at RM200 mil appealing for greater generosity among is following the direction set by the and U Mobile Communications Bhd rich people globally to give away at least Berjaya founder. “He is putting in place shares anticipated to be worth RM400 half their wealth to charity. a succession plan for top management, mil once listed on Bursa Malaysia, slated It’s not all work for Tan. He exercises as the present team comprises many for late 2012. every day at the gym to keep fit. “Tan who have reached retirement age. Handling the donations would be 2008 – BGroup acquires franchise still goes for scuba diving at Tioman He is taking the succession plan very Tan’s own Better Malaysia Foundation for Krispy Kreme Doughnuts and Island and other local resorts,” says the seriously and ensures the standard (BMF), which he set up several years Papa John’s Pizza Restaurants; close friend. operating procedure is in place. What ago as a vehicle for his philanthropy. BGroup launches U Mobile Sdn he is doing may not be very apparent in The foundation was to receive RM10 Bhd ‘Tan’s success Who is in the driver’s seat? the immediate term,” he says. mil annually from the ICULS, which is due to various 2009 – Acquires Friendster Inc While Tan is jet-setting around the “Tan’s success is due to various fac- pay a 5% interest per year, and future factors including for RM120 mil and later traded world to keep an eye on his personal tors including timing, networking, hard dividend income from U Mobile shares. timing, networking, its technology patent for 700,000 and his group’s foreign ventures, Robin work and divine blessing. There is no However in July this year, U Mobile hard work and divine blessing’ shares in Facebook Inc; his stake looks after the group’s local operations. single factor that we can attribute to his Sdn Bhd’s CEO Jaffa Sany Ariffin said has since grown to 3.5 million However industry observers are scep- building an empire. His and Robin’s high the company has no plans to be shares estimated to be worth tical about the senior Tan’s handing power network is a key to the success of listed on the local bourse and some US$140 mil over absolute authority to his son and the business.” will do so once it has reached heir apparent. Retired or not, the founder of a mature point of develop- 2010 – Obtains a But the close friend denies this. “[It’s] Berjaya will not be forgotten by Berjaya ment, when it has seven sub-franchise not true that he is still calling the shots, employees; the group has been holding million subscribers or a 10% to operate as much leeway is given to Robin these elaborate birthday celebrations since market share. He says it 7-Eleven days. Tan has faith in his son to run 2011 for him on what has been dubbed currently has no more than convenience Berjaya,” he says. Founder’s Day. five million subscribers and stores in A BCorp senior executive concurs. This year, the carnival-like event was an 8% share of the local tel- Malaysia and “Robin is in the driver’s seat when it graced by the Sultan of Selangor, Sultan ecommunications market. Brunei; entered comes to the group’s day-to-day opera- Sharafuddin Idris Shah; the Sultanah of Jaffa resigned as U Forbes billionaire tions,” she says. Pahang, Sultanah Kalsom; and the Jo- Mobile CEO in list with an estimated worth of US$1.3 bil (RM4.2 bil); The senior Tan relinquished his hor Sultan’s Consort, Raja Zarith Sofia  Continues on page 12 position as chairman of BCorp last Sultan Idris Shah. Hong Kong superstar gains control of Cardiff City FC February after having handed the CEO’s Andy Lau, a friend of the Tan family, by acquiring a 36.1% stake in the reins to Robin in January 2011. Robin had guests and shoppers abuzz when he club is supposed to hold the chairman’s made an appearance at the event at the 2011 – Berjaya Food Bhd listed position until the board finds a suitable concourse of Berjaya Times Square on Bursa Malaysia candidate. in Kuala Lumpur. “Since taking over as CEO almost At the 2012 Founder’s Day 2012 – Retires from BGroup, two years ago, Robin has not made any celebration, Tan promised paving the way for his son Robin major changes to the board but has to give RM600 mil of his to take over made changes at senior management estimated RM3.6 bil net 2013 – Lists Berjaya Auto level. “It appears he has eased into the worth to charity. What is 12 FOCUSM lead NOV 16-22, 2013

BCorp now a healthier company keehuachee.blogspot.com

 From page 11 slightly over RM800 mil satisfied August, making him the second by the issue of a similar number of Strong CEO to quit since 2010. Jaffa’s new BCorp shares at RM1 par. resignation came despite the sub- As part of the exercise, BCorp family scriber base’s having risen to five also issued some 1.46 billion million from one million during loan stocks to settle its bank his 15-month stint. borrowings. And to settle its bond Tan has said he wants to even- inter-company loans, it issued tually sell his business entities and 4.1 billion BCorp loan stocks IT is widely known that Tan Sri donate the money to charity. to Berjaya Land, and 3.6 billion Vincent Tan has a younger but no However pricing will be the key BCorp loan stocks as well as cash less prominent brother Tan Sri Danny issue, as some of his businesses, of RM130 mil to Berjaya Capital. Tan Chee Sing, who controls listed both private and public-listed, are It has been calculated that BCorp's property developer Tropicana Corp not doing well. estimated share capital of over Bhd (formerly Dijaya Corp Bhd). one billion shares could swell to The Tan brothers, who used to sell Complex restructuring exercise over 11 billion shares, depending reconditioned cars together, are said Some analysts are cautious about on the eventual conversion of its to be a force to be reckoned with as companies under Tan. For exam- loan stocks. they are set to develop Penang in a ple, analysts were not excited at Investors are also probably big way. the prospect of the Sports Toto tired of Tan’s listing-delist- In early 1992, the Tan brothers’ Malaysia Sdn Bhd (STM) Trust be- ing-relisting exercises. He is combined ownership of the Berjaya ing listed in Singapore, due mainly probably the first corporate figure Group (BGroup) conglomerate to the earnings dilution faced by to hold the record of his compa- amounted to about RM1.7 bil, built BToto shareholders post-listing. ny’s having the shortest listing up within barely a decade. Berjaya Sports Toto Bhd an- lifespan. Danny, the man behind the Standing: Winnie Sin, Chryseis Tan. Seated: Vincent, Puan Sri Esther Tan nounced last June it would spin Tan took Berjaya Retail Bhd Tropicana Golf and Country Resort off its gambling operations into private in 2011, nine months in Petaling Jaya, made inroads in a trust in Singapore called the after the company was first listed Penang following a RM10 bil mixed Sports Toto Malaysia Trust (STM on Aug 16, 2010, due to the dis- development called Bayan Mutiara Trust). mal performance of the shares. together with Ivory Properties Bhd The listing was targeted for He plans to list 7-Eleven Malaysia in 2011. mid-November last year, when it Sdn Bhd, part of Berjaya Retail. Meanwhile, Vincent, who would raise some RM1.24 bil; it Similarly, MOL Access Portal Bhd was embroiled in the Penang Hill was much delayed. It is believed was taken private in 2008 after it controversy, made a comeback to the delay was due to a lukewarm was listed on the Mesdaq Market Penang as a property developer after response to the proposed listing in 2003. Now there are plans to a hiatus of more than two decades. when the company approached relist it. Vincent, founder of BGroup, entered investors in Singapore and Lon- To many, Tan is seen as an asset into a deal to buy 22.8ha of prime Danny Tan is listed by Forbes as Eldest son and heir apparent don. trader. He will buy if he thinks the freehold land within the Penang Turf Malaysia’s 23rd richest man Robin Tan It was only in October, more prospects are good and sell if the Club for RM459 mil in 2011. than a year after the announce- price is right. He owns golf resorts Danny, who is on Forbes list as any directorships in BGroup’s San lost his son Kevin Tan in an ment, that BToto received the but doesn’t play golf. He owns a Malaysia’s 23rd richest man with listed companies but his eldest early morning car accident. Hours green light from the Monetary football club but doesn’t know a net worth of US$520 mil as at son, Dickson Tan Yong Loong, later, Kevin’s father-in-law Ung Authority of Singapore to lodge the rules of football. He invested February 2013, is building a W Hotel holds directorship in several of the Teong Chuan, 60, collapsed and STM Trust’s prospectus for its in pharmacies without realising and the Residences by Tropicana in group’s listed companies including died at the Jasin Hospital where the proposed listing on the main what drugs are all about. He made KL with Starwood Hotels. According as non-independent non-executive family had arrived to claim Kevin’s board of the Singapore Exchange. a fortune on Facebook shares but to Forbes, last year, he traded 73 of director of Berjaya Corp Bhd. body. BToto is one of Berjaya group’s doesn’t have a Facebook account. his own properties valued at US$310 Vincent’s eldest son and heir Vincent is married to Esther more recent restructuring exer- But to Tan, it doesn’t really mil to Tropicana for additional shares apparent Datuk Robin Tan was Tan. According to Forbes, Vincent cises. matter, as he believes they are all and loans. appointed as BCorp chairman last has 11 children who include eldest BGroup has found it tough to business opportunities. Danny also held senior posts at year and took over the reins as daughter, Chryseis (Golden Child stem its losses over the years. As Vincent’s BGroup for many years CEO in 2011. His brother, Rayvin in Latin). His other children include of April 30, 2005, it had accumu- Key entities under including as managing director Tan Yeong Sheik, is also on the Morvin, Euvin and Nevin, who carry lated losses amounting to some (2000) and deputy chairman (2004) board of BCorp. the “vin” behind their names in RM2.24 bil. Berjaya Group of BGroup. In July, tragedy struck the Tan honour of their father Vincent, and In 2005, Berjaya Group Bhd of Companies Currently, Danny does not hold family when Tan’s brother Tan Chee youngest daughter Chrystal. (BGroup) initiated a group CONSUMER restructuring exercise that saw Cosway Corp Bhd SoSomeme of Tofan Vincent Sri Vince nTan’st Tan ’spersonal personal s shareholdingshareholding in vari ino uvariouss companies companies BCorp assuming the listing status eCosway.com Sdn Bhd of BGroup, taking over as new Berjaya Books Sdn Bhd parent of companies that include Country Farms Sdn Bhd Tan Sri Vincent Tan Berjaya Land Bhd, Berjaya Capital PROPERTY INVESTMENT & DEVELOPMENT 100%* 46%* # Bhd and BToto. Berjaya Land Bhd In typical Berjaya style, the Berjaya Hills Bhd 88.4% MOL Global Berjaya Retail Bhd U Telemedia S/B Intan Utilities Bhd restructuring was complex and GAMING & LOTTERY Pte Ltd involved some juggling of assets. MANAGEMENT BCorp is now a healthier Berjaya Sports Toto Bhd 100% 39.2% 40.1% Prime Gaming Philippines Inc 7-Eleven company, although its profits International Lottery & Totalizator Malaysia S/B 100% MOL AccessPortal Berjaya have been affected by higher U Mobile S/B Systems Inc, USA Bhd Infrastructure S/B finance costs and losses from the FINANCIAL SERVICES 100% Convenience operations of some of its retail Inter-Pacific Capital Sdn Bhd Shopping (Sabah) S/B 100% distribution businesses for the fi- Berjaya-Sompo Insurance Bhd Friendster Inc. 15% Indah Jaya Silver Bird 14.4%* Plantations S/B Group S/B nancial year ended April 30, 2013. FOOD & BEVERAGE 100% Singer (Malaysia) Berjaya Food Bhd In FY2013, BCorp posted a S/B Berjaya Roasters (M) Sdn Bhd 99.4% 12.79% lower net profit of RM74.98 mil, Berjaya VTCY Berjaya Krispy Kreme Redtone Intl. Bhd 100% 100% S/B from RM311.84 mil a year ago, Doughnuts Sdn Bhd Berjaya Radio Metropolitan on the back of a higher revenue of Berjaya Starbucks Coffee Shack S/B Utilities Corp. S/B RM7.38 bil from RM7.06 bil. The Company (M) Sdn Bhd 34.4% Eco Palm Paper Powerace Comms. 80% Jolibean Foods Pte Ltd S/B Network S/B lower profits were due mainly to Facebook Inc. one-off exceptional gains from the MOTOR Berjaya Auto Bhd 37.8% 12.2%* disposal of subsidiary companies, GPS Tech OTHERS Stemlife Bhd amounting to some RM309.7 mil Cardi City FC Solutions S/B Berjaya Higher Education Sdn booked in FY2012. Bhd 70% Tioman Hill 45% Under the restructuring exer- Informatics Education Ltd, 17% Caring Pharmacy Jitumaju S/B cise, Bukit Tinggi Resort, which Singapore Resort S/B Taiga Building Products Ltd, Group Bhd Research by Dinesh Immanuel owns Colmar Tropicale – a mock- Canada French resort on a hillside – was Berjaya Media Bhd Source: Berjaya Group website, CCM records; Note: Only selected companies, this is not an exhaustive chart injected into BCorp at a cost of *Note: Combined stake by Berjaya Group and Tan Sri Vincent Tan; #Note: Holds an undetermined controlling stak e