The UEM-Renong group's announcement of its final restructuring plan drew mixed reaction from investors yesterday. In its heyday, an announcement by the group would have boosted sentiment on the KLSE, but Thursday's news failed to even lift the share prices of most companies within the new UEM Group.
Except for three Intria Bhd, Projek Pengelenggaraan Lebuhraya Bhd (Propel) and PLUS Expressway Bhd shares in the group's companies closed lower.
Renong was the worst performer, falling 15% or 7 sen to 39.5 sen. Time Engineering Bhd dropped 1.5 sen to 87 sen and CIMA fell 18 sen to RM2.15.
Propel was the biggest gainer of the group, adding 11 sen to close at RM2.70. Intria rose 8 sen to 88.5 sen, while PLUS Expressway only turned positive in late trading and finished one sen higher at RM2.14.
As for the group's other companies, Pharmaniaga Bhd fell 2 sen to RM4, Time dotCom was also down 2 sen to RM1.29, Faber Bhd lost one sen to 24.5 sen, and Kinta Kellas Plc dropped 0.5 sen to 83 sen.
Essentially, the shares failed to live up to the huge expectations built up in the market, although the announcement was made at a time of much uncertainty amid the war in Iraq.
On Thursday, the UEM-Renong group, now known as UEM Group, unveiled its final restructuring plan to address not just the problems at Renong but also the group's future growth path.
Part of the plan includes taking Renong private and transferring its listed status to UEM World Bhd, which would have four core activities: engineering and construction, healthcare, environmental services, and property.
Renong will be renamed UEM Land and own Prolink. Intria will be renamed UEM Builders and act as the flagship of the group's engineering and construction activities.
Some analysts, who viewed the plan positively, said the important thing was that there was now a plan for the group going ahead. However, they felt that Renong's minority shareholders were worst off compared to the shareholders of Intria and Propel.
But the point raised is that Renong is already in troubled waters: it cannot generate enough income to pay the interest expense for its special purpose vehicle (SPV) bonds of RM3.6bil.
Shareholders have to accept the reality that Renong is not worth that much. The revised net asset value of Renong is only 25 sen, after Prolink's valuation, and net tangible asset backing a share is 6 sen, said an official of the group.
The restructuring gives Renong shareholders shares in UEM World, which would have four core activities that can generate over RM100mil in net profit. This is the best option we can craft,'' the official said, adding that problem assets such as Park May, Faber Bhd and Time Engineering had been taken off Renong to give it a new lease of life via UEM Land.
Will the glory days ever return for the UEM Group?
It depends how each unit performs within the enlarged group and the onus lies on the management team of each unit to perform,'' the official said.
He remains confident the new structure provides for greater co-ordination and improved operational efficiencies, and the group should be able deliver the profits the market expects.