Why has Faber to give up 60% of Sabah and Sarawak concessions? (Update)

Health minister Datuk Seri Dr S. Subramaniam withnessing the MoU between Faber Mediserve Sdn Bhd represented by its director Azmir Merican Amir Merican (front right) and health ministry secretary-general Datuk Farida Mohd Ali (front left) on hospital support service concession in Putrajaya. Also present are Group CEO UEM Group Datuk Izzaddin Idris (behind right) . MOHD SAHAR MISNI/The Star

PETALING JAYA: Although integrated facilities management specialist Faber Group Bhd’s long wait for a concession agreement to manage hospital support services in the northern states of Peninsular Malaysia have been settled, questions are now being raised as to why the company has to concede 60% of its stakes to other parties in the Sabah and Sarawak concessions.

Faber was recently awarded a concession to provide support services to government hospitals in Perak, Penang, Kedah and Perlis for 10 years, but the investor community is wondering whether the company has been shortchanged for the longer term since it has to give up stakes in the Sabah and Sarawak concessions.

The issue seems to be that since Faber continues to drive the business in Sabah and Sarawak despite the reduced stakes, would it be fair to the company as it would be only getting 40% of the revenue?

While the company’s managing director and chief executive officer Azmir Merican said the stake reduction was not a new issue and was made known two years ago, industry observers noted that the company would have invested quite a bit in assets and resources for the concessions in Sabah and Sarawak.

Industry observers feel that the Sabah/Sarawak concessions need to be further examined since like the concession to manage hospital services in the northern peninsula states these concessions were also for a 10-year period.

“With the exception of companies that have gone public, usually what an associate partner does is to allow the bigger shareholders drive the business. In certain unique circumstances, due to regulatory conditions and the like, the driver of the business may have to hold 50% minus one share or limit its losses to 49% at the most,” an analyst explained.

For instance, due to regulatory restrictions, companies such as DiGi.com Bhd’s biggest shareholder Norway-based Telenor ASA owning an associate stake of 49% in the former, albeit to a much closer 50% threshold than Faber’s 40% stake.

Analysts also said they wanted to know what the other joint venture parties were bringing to the table as Faber would have already invested a hefty sum throughout the years to acquire and sustain these assets when the company wholly ownedthe concessions in both states.

Faber managing director and chief executive officer Azmir Merican told StarBiz in an email: “Faber, though now a minority shareholder, has substantial experience in the industry and will ensure that the business will continue to run smoothly,” he said.

Azmir said the company was not “able” to release any financial information pertaining to these contracts and how it would impact Faber but would do so once it had obtained “clearance” from the Government via the Health Ministry.

The concessions in Sabah and Sarawak are owned via 40% stakes in Sedafiat Sdn Bhd and One Medicare Sdn Bhd, respectively.

The balance stake is owned by companies based in both states. A further check with the Companies Commission of Malaysia showed that Tan Sri Bustari Yusuf, a major shareholder of Petra Energy, held a 36% stake in the Sarawak concession.

For the Sabah concession, Datuk Ag Buhtamam Ag Mahmun has a 24.9% stake in Sedafiat. The other significant shareholder in Sedafiat is Sabah’s Economic Development Corp with a 24% stake.