Royal boost for Berjaya Assets

Royal factor: Tan and Sultan Ibrahim at the opening of the Kyoto Four Seasons Hotel and Hotel Residences in Kyoto Japan.

Expanded investment from Johor royalty draws investors to company’s shares

THE increased presence of Johor royalty in Berjaya Assets Bhd (BAssets) seems to have enhanced the appeal of the company’s stock to some investors.

According to three analysts polled by StarBizWeek, interest has grown in the diversified property investment, hospitality and leisure group that owns Berjaya Times Square, as the presence of Johor royalty in BAssets has raised expectations of robust activities that could enhance the value of the company that has suffered two years of financial losses.

On that note, they say in consensus that market perception towards BAssets is expected to improve given the business influence of the Sultan of Johor, Sultan Ibrahim Ibni Almarhum Sultan Iskandar, who is now the second largest individual shareholder in the company.

“Sultan Ibrahim is known for his business acumen. So, when he invests in a company, the market will take notice,” one of the analysts explains.

Some investors may even follow where the business-savvy Johor ruler puts his money, as they are persuaded by the perception that his presence in the company could be a precursor to good growth prospects and potential upside for the company’s stock,” the analyst, who is attached to a local brokerage, explains.

BAssets’ shares have been rallying since end-March 2017, rising to a multi-year high of RM1.40 by mid-May.

Yesterday, the counter closed one sen higher at RM1.21.

This represented a gain of eight sen, or 7%, over the week, and about 32% year-to-date

Meanwhile, another analyst says he expects investor interest in BAssets to be sustained by improving confidence in the company’s prospects, backed by the presence of Sultan Ibrahim in the company.

“Sultan Ibrahim has boosted confidence in the prospects of BAssets. This is because most investors will believe that Sultan Ibrahim will not put money where he does not expect to get good returns,” the analyst with a local bank explains.

Similarly, another broker concurs that the presence of Sultan Ibrahim in BAssets augurs well for the company.

“His influence in the local business scene could give an added advantage to BAssets,” he explains. BAssets announced on Monday that Sultan Ibrahim had become its second largest individual shareholder after he acquired 80 million shares in the company at a discounted price of RM1 apiece at the end of last month from Berjaya Group’s founder, Tan Sri Vincent Tan, and other companies controlled by him.

The transaction, done via several direct transactions off market, raised Sultan Ibrahim’s stake in BAssets to 120 million shares, or a stake of 10.09%.

Tan remains the single largest shareholder in BAssets with an interest of 56.23%.

Hot on the trail of the Sultan Ibrahim’s emergence as the second largest shareholder in BAssets is the appointment of his 31-year-old daughter Tunku Tun Aminah Sultan Ibrahim Ismail as the company’s chairman over the week.

Tunku Tun Aminah also serves as a director on the board of several private companies, including Berjaya Waterfront Sdn Bhd, REDtone Network Sdn Bhd, Jauhari Maksima Sdn Bhd and Ibzi Holdings Sdn Bhd.

At present, she is also chairman at REDTone International Bhd – another company in which Sultan Ibrahim has shared interests with Tan.

Indeed the tycoon has a close business relationship with the Johor ruler who has endeared himself to many Malaysians because of his rational stance and fair judgement on several important social issues in the country. Besides BAssets, Sultan Ibrahim also owns shares in several companies in which Tan is the major shareholder.

These include convenience store chain operator 7-Eleven Malaysia Holdings Bhd, in which Tan owns a 41.35% stake, while Sultan Ibrahim owns a 9.76% stake; and telecommunications companies REDtone International Bhd, in which Tan owns a 51.71% stake and Sultan Ibrahim owns a 17.9% stake; and U Mobile Sdn Bhd, in which Tan owns a 21.46% stake, while Sultan Ibrahim owns a 15% stake.

Apart from his collaboration with Tan, Sultan Ibrahim on a personal basis has interests in other business areas. For instance, his private vehicle, SIPP, is involved in rail and power projects in Malaysia such as the electrified double-tracking railway line project linking Gemas to Johor Baru and the 1,440 MW gas-fired combined-cycle power plant in Pasir Gudang in Johor.

On Sultan Ibrahim’s increased involvement in BAssets, Tan says it is a reflection of the Johor ruler’s positive outlook for BAssets’ long-term prospects.

“His Majesty’s stature as the second largest substantial shareholder will definitely augur well for BAssets in the expansion of its businesses,” Tan points out in a statement.

Growth catalysts

A check on Bloomberg data reveals that only one research house covers BAssets, that is, Mercury Securities.

The brokerage has a “buy” or “outperform” recommendation on BAssets’ shares, with a target price of RM1.62 based on a valuation of one time over the book value of the company for the financial year ending June 30, 2018. At its current level, BAssets’ shares are trading at an inexpensive 0.6 times book value.

In justifying its positive outlook on BAssets, Mercury Securities, in its report dated July 18, highlighted a list growth catalysts for the company.

These included the substantial value and tenant base at Berjaya Times Square; potential upside from the expansion and land reclamation of Berjaya Waterfront in Johor Baru; potential upside from its venture into the motor vehicle assembly/distributorship via its acquisition of Oriental Assemblers Sdn Bhd; possible divestment of some lands/buildings; and possible dividend/bonus upside. Mercury Securities also noted that BAssets’ experienced management team in the property development and management industry was a valuable asset for the group.

BAssets is the major owner of Berjaya Times Square, one of Malaysia’s largest retail and commercial malls which houses Berjaya Times Square Theme Park, the largest indoor theme park in Malaysia.

In Johor Bahru, the group owns the Berjaya Waterfront Hotel, Shopping Complex and Ferry Terminal, as well as office units at Menara MSC Cyberport. Through its wholly owned subsidiary Berjaya Assets Food Sdn Bhd, Berjaya Assets has a licence agreement with Greyhound Café Co Ltd for exclusive rights to establish and operate restaurants under the trademark Greyhound Café in Malaysia.

In May 2017, BAssets completed the acquisition of the entire stake in Oriental Assemblers for RM32.5mil, which comes with a 14.74-acre plot of leasehold land and manufacturing licence.

Oriental Assemblers is currently carrying out assembly works for Chinese automotive models.

BAssets is reportedly now in talks with an Asian automotive manufacturer for the assembly of its cars under Oriental Assemblers.

BAssets executive director Koh Huey Min reportedly said the automotive brand is already present in Malaysia under a different franchise holder.

Meanwhile, BAssets is currently looking at potentially raising close to RM1bil to finance the reclamation works for its 55-acre piece of land situated beside its existing development Berjaya Waterfront in Johor Baru.

The reclamation works for the land meant for a mixed development project, comprising hotels, high-end residential units and a hospital, are expected to begin in 2018 after the necessary approvals are obtained.

At present, BAssets is working at boosting the occupancy rates at Berjaya Waterfront to 70% by the end of this year from around 50% in August. According to Koh, the group is mulling the potential listing of Berjaya Waterfront in via a real estate investment trust, but it needs to first achieve higher occupancy rates and yields for the project.

BAssets has plans to attain a syariah-compliant status. Towards this end, the group is looking at potentially moving its 65%-owned gaming entity, Natural Avenue Sdn Bhd, under another Berjaya company.

Natural Avenue is the exclusive agent for Sarawak Turf Club’s special cash sweep numbers forecast lotteries.

BAssets is currently in the midst of implementing a proposed share split involving the subdivision of every one existing ordinary share into two shares.

The exercise, aimed at improving the trading liquidity of BAssets’ shares on the Main Market, is expected to complete by the end of this year.

Using the theoretical price of RM1.23 based on the latest practicable date prior to the announcement of the exercise on Sept 5, 2017, BAssets’ shares would be valued at 61.5 sen apiece upon completion of the proposed share split.

BAssets suffered two years of financial losses, as its performance was dragged down by its number-forecast business which continued to be impacted by rampant illegal gaming activities in Sarawak.

For FY2017, BAssets posted a net loss of RM11.1mil, an improvement from a loss of RM54.1mil in FY2016. This resulted in the group’s loss per share narrowing to 0.99 sen from 4.86 sen previously. BAssets registered a lower revenue of RM356.4mil for FY2017, compared with RM387.1mil in the preceding year due mainly to lower contribution from the gaming business segment. In its latest quarterly financial report, BAssets conceded that the group’s operating performance for FY2018 would remain challenging.

BAssets said it expected the group’s property investment and hotel and related businesses operated by Berjaya Times Square Sdn Bhd and the gaming business operated by Natural Avenue to maintain its occupancy rates and market share, respectively.

In FY2016, property development and investment contributed to 46% of BAssets’ revenue, while gaming and related activities contributed 43%, and hotel and recreation 11%. As at the end of June 2017, BAssets’ net assets per share stood at RM1.89.

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