Short Position

Winds of change at MUI 

FOR a long time now, hardly anything positive has been taking place at asset rich yet loss-making group at Malayan United Industries Bhd or MUI.

MUI recorded losses amounting to RM131.7mil for FY17, on the back of RM415.1mil revenue, despite the group owning a plethora of good assets.

But on Friday, an interesting announcement was made. The company said it had appointed Andrew Khoo Boo Yeow as its new CEO. Andrew, it turns out, is a 45-year son of MUI’s owner namely Tan Sri Khoo Kay Peng. The appointment also meant that the tycoon Khoo is now elevated to the position of executive chairman, vacating the CEO position for his son.

What now? Last month, rumours surfaced that a big local personality from the corporate scene had his eyes set on acquiring the controlling stake in MUI from Khoo, who owns 47.58% of the company. It is understood that this party had even hired financial advisory firms to approach Khoo, who has been out of the public limelight for several years now.

The appointment of Andrew though gives the impression that Khoo has some plans of reviving the group. The group has good assets but been unable to do much to unlock that value for shareholders.

As of June 30, 2017, the company had properties located across Malaysia, Singapore, Australia, the United States, the United Kingdom and Hong Kong, with a total net book value of RM890.26mil. However, most of the assets have not been revalued recently.

The company has a market capitulation of a mere 615.8mil. For example, the freehold 13-storey Corus hotel located along Jalan Ampang that MUI owns has a net book value of RM54.50mil while the company also holds land, both freehold and leasehold, all over the country. Some of MUI’s noteworthy subsidiaries include London-listed retail chain Laura Ashley plc, Malaysian retail chain Metrojaya Bhd, Corus Hotels Ltd, MUI Properties Ltd, confectionery manufacturer Network Foods International Ltd, as well as stockbroking firm PM Securities Sdn Bhd.

Laura Ashley, a UK brand synonymous with floral dresses and English-style home furnishings, has 167 stores throughout the UK and 243 franchised stores globally.

Senior Khoo is already 78 and having a succession plan sooner rather later augurs well for the company.

Andrew’s appointment to the helm will surely come with fresh ideas and perspective.

Hopefully it is part of a larger plan to unlock value for all shareholders in the group.


Regulating crypto scene

REGULATORS ought to hasten their rein over the trading and issuing of cryptocurrencies. The reason for that is not really about investor protection -- investors jumping into the bitcoin craze shouldn’t blame anyone other themselves if the price crashes -- but more about ensuring that dodgy money isn’t in play.

There is a school of thought that reckons the world over, parties wishing to stay out of radar of tax authorities or the money laundering police, are using crypto currencies such as bitcoin to move monies around.

The theory goes that a number of these parties use their funds (the source of which is often times unknown) to invest into the powerful computers to set up bitcoin mining centres. Generally speaking, the process of mining bitcoin is a profitable one, so not only are these parties able to move their possibly ill gotten gains into bitcoin, they are able to do so profitably.

However, many cryptocurrency experts will argue that it is not possible to for illegal monies to go into bitcoin without getting traced. And it is true that many parties who bought and sold products on the dark web using bitcoin have been hauled up. However, the point is, one should not rule out the possibility that certain unsavoury parties have figured out ways of mining bitcoin and churning those profits into other currencies and ultimately cashing them out in fiat currencies without getting tracked by the authorities. This is why the local regulators should not waste anymore time in reining the exchanges that Malaysians use to trade and move their cryptocurrencies, to make sure that the people hiding from the law are not using it.


New reality

WHAT happens when you are told that you won’t need to do as much as before. If you are an employee, it means less work. If you are a company, then the situation is a lot different.

When Petroliam Nasional Bhd told service providers that there will be big cuts in what they will need for the next few years, that message alone will be enough to cause a number of sleepless nights for bosses of those companies.

The reason is that Petronas is basically the end buyer of the services they provide. If Petronas says that it will require fewer barges and service vessels to ply the routes between the rigs they own and onshore, or the fact that not as many rigs will be needed in the next few years, then that will have serious repercussions on the industry in Malaysia.

One of the reasons for the muted demand for services by Petronas is that Malaysia is a signatory to the oil cuts that will see oil producing nations pull back on the reigns on exploration. Petronas says it will produce 100,000 barrels less to 1.7 million barrels of oil equivalent per day in the next five years.

It basically means that whatever oil production and exploration activity that will be conducted wil be to replace depletion that happens in the industry.

That will not be great news for the many service providers that rely on Petronas for their livelihood.

But it also sends a strong message and impetus to the thousands of service providers that things need to change. Petronas has been talking about consolidation among service providers for a long time but nothing substantial has taken place in the intervening years since the collapse in global crude oil prices.

The new reality is that oil and gas service providers need to merge and consolidate to survive in the future of the industry that has become apparent that the days of US$100 oil prices is going to be tales the current generation will tell their children.

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Business , MUI , Andrew Khoo


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