DATUK Mokhzani Mahathir is the man of the moment, having secured a cash hoard as a result of the SapuraKencana Petroleum Bhd merger. Mokhzani’s interest in new investments has been clear from his recent transactions in the market.
Together with his key lieutenant Yeow Kheng Chew, or better known as KC, they appear to be on the prowl for the hottest deals in town. Sources say the pair have been gleefully courted with potential deals.
Having Mokhzani as a key investor undeniably increases the brand value of any company. Little-known Yinson Holdings Bhd is one case-in-point. News that Mokhzani, through his vehicle Kencana Capital Sdn Bhd, was taking a 15% placement in the company helped the stock rally more than RM1.50 in less than a month. Today, Yinson is trading at a respectable RM4.95.
But what is the modus operandi for Mokhzani’s yield-hunting?
Mokhzani works in a team with KC, his partner since the days of Tongkah Holdings Bhd in 1987. Presently KC is a non-independent executive director of SapuraKencana, as well as the executive vice-president for the corporate finance and treasury division in SapuraKencana.
During Mokhzani’s tenure, KC had held key positions in Kencana, Tongkah and Pantai Holdings Bhd, namely as executive director. KC is also a director in Kencana Capital, which was a cornerstone investor in the mega-listings of IHH Healthcare Bhd and Astro Malaysia Holdings Bhd last year.
So far, these initial public offering (IPO) investments have bore fruit save for Astro, which is still trading at around its debut price of RM3. IHH is up 41.79% from its IPO price of RM2.80.
In email responses, Mokhzani says that Kencana Capital looks at both short-term and long-term investment opportunities. Presently, most of its investments are in Malaysia.
“Our longer-term investments are mostly in property, which includes investments with Capital Land, UOA and in Menara SapuraKencana. Of course, we have significant investments in the oil & gas (O&G) sector. We do have some exposure to the information technology sector but we are divesting,” he says.
Mokhzani adds that Kencana Capital does not set targets in terms of the number of investments, their size or holding period.
“We also don’t have a specific amount of funds to invest. Having gone through two boom and bust cycles, we’re quite conservative in our investment outlook, tenure and targets,” he points out.
According to sources, Mokhzani has been linked to upcoming special purpose acquisition company Sona Petroleum Bhd as a possible cornerstone investor.
On this note, Mokhzani says the promoters of Sona Petroleum are known to him, given that the O&G industry is a small community, of which he has been a part since the 1980s.
“However, we did not participate in the new listing,” he confirms.
Kencana’s most recent interest is Yinson, an up-and-coming floating production, storage and offloading concern. Last month, Yinson said it would issue 37.81 million new shares, or 14.64% of its enlarged capital spread, to Kencana Capital, raising RM106.62mil.
This investment has been a lucrative one for Mokhzani. He took up shares in Yinson at RM2.82, or a 15.8% discount to its pre-private placement price of RM3.55. At Yinson’s last close of RM4.95, Mokhzani is sitting on roughly RM80mil in paper gains.
Yinson appears to be on the cusp of great things. The company is taking over Norway's Fred Olsen Production ASA (FOP) at RM551.34mil, or RM5.20 per share, making it one of the world's largest owners of FPSO vessels.
On the next big thing to look out for, Mokhzani points to the O&G sector, which he believes will remain robust and exciting for a few years to come.
“I don’t think there will be a ‘next big thing’ to bet on compared to the O&G sector. Maybe energy? The amount to be invested in the O&G sector still seems to be very significant. There are a lot of countries depending on domestic O&G revenue to fund their national budgets.
"Hence, opportunities will continue to present themselves to those who have the right assets, financial resources, manpower, track record and risk appetite,” he says.
This being the case, it will certainly be interesting to see which company is next on Mokhzani’s buy list.
Sources say Mokhzani came into “some extra cash” after the merger of SapuraKencana in May last year. This was the result of a massive RM11.85bil merger exercise of two of the country’s most prominent O&G players – Kencana Petroleum and SapuraCrest Petroleum Bhd.
Under a cash and share swap deal, a special purpose vehicle called Integral Key Sdn Bhd bought all the assets and liabilities of SapuraCrest for RM5.87bil and Kencana for RM5.98bil.
The acquisition was satisfied by some five billion Integral Key shares priced at RM2, and RM1.84bil in cash.
Integral Key acquired SapuraCrest’s business for RM5.87bil, equivalent to RM4.60 per share, and Kencana Petroleum’s operations for RM5.98bil, or RM3 per share. At that time, Mokhzani had an indirect 31.7% stake in Kencana Petroleum via his privately-held vehicle Khasera Baru Sdn Bhd. Upon the listing of SapuraKencana, Mokhzani held an indirect stake of 15.93% in the merged entity.
Mokhzani’s windfall would have come from the cash portion of the deal, as he is still a shareholder of SapuraKencana. A check on Bloomberg shows that Khasera is still the firm's second largest owner with a 13.27% stake.
Under Kencana's capital repayment for Kencana, some RM968.68mil out of the RM1.84bil was returned to shareholders. Back-of-the-envelope calculations show that Mokhzani’s 31.7% indirect stake in Kencana would have netted Khasera some RM307mil in cash.
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