THE UEM Group made a strong return to the KLSE yesterday, with its flagship – UEM World Bhd – traded at a 66-sen or 41% premium over its swap price of RM1.60 minutes after it was quoted.
UEM World was created to assume the listed status of Renong, address the latter's debt problems and ensure earnings sustainability. Renong, whose shares were last traded at 42 sen, was taken private and de-listed on Oct 17. The restructuring involved a share swap.
UEM World controls four of the six core businesses – construction, engineering, healthcare, environmental services, property and investments – and four listed companies (UEM Builder Bhd, Pharmaniaga Bhd, Kinta Kellas plc and CIMA Bhd) of the UEM Group.
UEM World chairman Datuk Abu Hassan Kendut said the company's listing marked the culmination of a restructuring exercise that began two years ago.
On the share price at the opening bell, he said: “It was quite a pleasant surprise.”
UEM Group managing director and chief executive officer Datuk Abdul Wahid Omar expressed similar sentiments. “The share price performance was better than expected.”
However, in intra-day trade, UEM World succumbed to selling pressure and fell to a low of RM1.87 before regaining ground to close at RM1.90, up 30 sen or 19%. A total of 18.9 million shares changed hands during the day.
Dealers said some retail investors were selling, but others, including some institutional funds, were picking up the stock as they felt the group had now been revitalised. One attraction is that it has strong links with the government, being indirectly controlled by the government's investment arm, Khazanah Nasional Bhd.
Wahid declined to put a fair value on UEM World, saying: “Our role is to manage the company in the best possible manner so that it remains profitable, brings in new business and ensure that there is better corporate governance. We leave the investors to determine the share price.”
Prodded further on corporate governance – said to be a serious issue previously – he replied: “The new management, which has been in place for the past two years, believes in corporate governance and has put it into practice.
“In all our exercises, the interest of minority shareholders is duly addressed and all of them fairly treated. This is an indication of how we will operate in the future.” Wahid said UEM World offered an option for investors looking for reasonable returns. “This stock is in a better financial position, has a clearer structure, controls profitable entities and has better corporate governance. It is a profitable company with a visible growth path.”
UEM World expects to report an after tax profit of RM390mil for the financial year ended Dec 31, 2003, but Wahid declined to give any estimates for next year.
Although the company's earnings this year are very much driven by exceptional items, he expects this to change, with earnings to be derived from operations beginning next year.
The engineering and construction division has been the main contributor, providing about 50% to group's earnings, but the property and pharmaceutical divisions will make significant contributions in the next five years.
Wahid said the restructuring of UEM had been completed and the debts of the UEM Group were now “at a manageable level of RM15bil – down from RM30bil previously – and most were project related debts.”
On the group's divestment plan, Wahid said only its 32.5% stake in Ho Hup Construction Bhd was up for sale. Talks were in progress with an individual but he did not expect the deal to be concluded this year. He declined to name the person.
He added that UEM World had no plans to list other divisions within the group as it already has four listed entities.
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