GOVERNMENT-LINKED plantation and financial companies are potential candidates for mergers when the government steps up efforts to consolidate companies in common sectors.
“Plantations offer good scope for mergers among government-linked companies. In fact, this is a topic which has been raised more than once in the past,” said financial portal Surf88.com.
Kumpulan Guthrie Bhd and Golden Hope Bhd have a common major shareholder in Permodalan Nasional Bhd (PNB). According to the latest annual reports, PNB owns a 46% stake in Kumpulan Guthrie, while Amanah Saham Bumiputra (a member of PNB group) and PNB hold 43% and 6.8% respectively in Golden Hope.
PNB also has a 49.6% stake in Island & Peninsular Bhd (I&P).
|The major listed government-linked companies|
|Company||% held by government-linked organisations*||Major shareholder|
|Golden Hope Plantations||84||PNB|
Acting Prime Minister Datuk Seri Abdullah Ahmad Badawi announced on Wednesday that the government would facilitate mergers of government-linked companies in common sectors as part of its efforts to add depth to the market and make these companies more attractive, especially to foreign investors.
As early as last year, the merger process among plantation companies had started. The management of Kumpulan Guthrie had indicated it would announce details of the group's rationalisation plan, which would involve merging its plantation business with those of its subsidiaries, Highlands & Lowlands Bhd and Guthrie Ropel Bhd, resulting in the creation of one of Malaysia's largest palm oil producers.
According to Surf88.com, the potential savings from the economies of scale arising from the mergers in the Kumpulan Guthrie group is likely to be substantial.
Analysts said valuation was a major hurdle for mergers in the plantation sector, particularly when the companies' shares were currently traded below their net tangible asset (NTA) values.
Many of these companies' assets have not been revised to market value; hence, their existing NTA values may not reflect the actual worth of plantation companies, they added.
“It is very difficult to come out with an all-round favourable valuation that pleases everyone, given the current gap between the NTA and market price,” said an analyst.
PNB appears to be interested in consolidating its wide range of businesses such as in plantations and ports.
Analysts said the merger between I&P and Austral Enterprises Bhd a year ago was seen as a move by PNB to start the ball rolling for more merger activities in the plantation sector.
In fact, PNB's efforts to rationalise its business activities started with the merger between Kontena Nasional Sdn Bhd, Klang Container Terminal Bhd and Klang Port Management Bhd in 2000.
The merger of these three companies had created Northport Corp Bhd, which is now a single port operation and transportation company. PNB now holds a 53.4% stake in Northport Corp.
Government investment agencies too have relatively large shareholdings in listed insurance companies such as MNI Bhd and MNRB Bhd.
OCBC Research head of research Franklin Tan said the new measures could also pave the way for the banking sector to undergo the next round of consolidation.
As the banking system is expected to be liberalised by 2007, Tan expects the local players to start aligning with each other in the next two years.
According to the latest annual reports, PNB holds a 16.5% stake and ASB 31.5% in Maybank, while Khazanah Nasional and Ministry of Finance have stakes of 14.3% and 16.8% respectively in Commerce Asset-Holding.
Lembaga Tabung Angkatan Tentera holds 42% in Affin Holdings Bhd, parent company of Affin Bank while Khazanah Nasional has a 30% stake in RHB Bank.
However, TA Securities head of research C.K Ngu believes that the next round of banking consolidation would only start after the integration of commercial banks and finance companies.
“Certain foreign investors may find that there is a lack of companies that have global presence on the KLSE compared with other stock exchanges such as in South Korea which has big names like Samsung,’’ said a research manager.
“There is only a handful of these companies listed on the KLSE such as the YTL group and Resorts World Bhd,” the manager added.
Analysts viewed that the Government's inititative to create such premier companies with global competitiveness would help attract foreign interest in the KLSE.
They also pointed out that the maximum charge of RM200 stamp duty on all securities trading would benefit foreign and large local institutional investors who invest in large sums.