Entry of new player expected to happen as Pelaburan Mara prepares to exit shipper
A Singapore-based company controlled by Malaysians is expected to emerge as the major shareholder in loss-making PDZ Holdings Bhd as Pelaburan Mara Bhd (PMB) prepares to exit the little-known container shipper.
A source tells StarBizWeek that the entry of the new shareholder will happen after the completion of PDZ’s rights issue exercise on Jan 22.
“The new shareholder will replace PMB as a substantial shareholder. It may have plans to work with PDZ to expand the latter’s operations in the shipping industry,” says the source, who declined to name the prospective shareholder.
Currently, PMB, an asset management firm wholly-owned by Majlis Amanah Rakyat (Mara), is the single largest shareholder of PDZ, with an equity interest of nearly 23%.
PMB group chief executive officer Datuk Ahmad Nazim Abd Rahman sits as a non-independent, non-executive director on PDZ’s board of directors.
The party that is coming in is said to have common shareholders with Sanichi Technology Bhd .
The latest development in PDZ is timely as the company has just announced its entry into the Indonesian shipping industry.
Recently, PDZ inked a memorandum of understanding with PT Indonesia Bulk Carrier (IBC Group) to provide total maritime logistic solutions such as container liner, bulk cargoes and oil and gas support vessels. Apart from these, the PDZ-IBG Group partnership will offer other related services such as vessel chartering, pooling management and shipping consultancy.
With over 20 years of management experience in the Indonesian maritime industry, Jakarta-based IBC Group has served notable clients such as Glencore International and Hai Yin Group, among others.
PDZ executive director cum chief executive officer Christopher Tan had said the company has long aimed to expand its footprint regionally, via a partnership with a reputable maritime industry leader.
“Indonesian shipping laws for foreign investment and cabotage policy requires partnership with local Indonesian players.
“This partnership with the reputable IBC Group opens up PDZ’s expansion into the Indonesian market and is expected to contribute positively to PDZ’s profitability with its favourable tax regimes and government initiatives,” he was reported as saying.
Apart from Indonesia, PDZ is also eyeing to set up regional offices in other key markets such as Thailand and the Philippines within the next two years.
The Main Market-listed PDZ is a smallish company, with a market capitalisation of approximately RM39mil. The container shipper has been languishing in the red since 2013 as a result of weak operational performance. In the first nine months ended Sept 30, 2017, PDZ’s net loss widened to RM2.76mil, compared with a net loss of RM2.5mil a year earlier.
Its top line tumbled 90% year-on-year to RM7.55mil as its ocean liner business was affected by the arrest of its vessels.
The source adds that PMB will be gradually reducing its stake in PDZ and a few other companies as it plans to focus on businesses related to financial services.
A quick check on Bloomberg shows that PMB currently holds ownership in several listed companies such as TH Heavy Engineering Bhd , Carimin Petroleum Bhd and Sanichi Technology Bhd.
It is worth noting that PMB’s stake in PDZ is the largest compared to the other companies.
PMB emerged as PDZ’s single largest shareholder in late April 2014. PMB bought into PDZ with the intention to make the latter its main oil and gas (O&G) vehicle, given the extremely lucrative O&G market in 2014.
The asset management firm paid RM41mil to buy a 27% controlling stake at an average 18 sen per share, mainly from tycoon Tan Sri Robert Tan Hua Choon
At 18 sen per share, the deal raised some eyebrows as it was above the market price of 15.5 sen at the time.
Robert, who was once a close associate of former finance minister Tun Daim Zainuddin, had walked away with RM30mil from the share sale. Sources say that PMB’s cost over time has come down to about 16 sen and it would not make a loss from the disposal.
“PMB’s exit from PDZ will not come at a loss. However it is also not making much gains from its investment in PDZ,” says the source. Given its current financial difficulties, PDZ has been trying to restructure itself internally in order to streamline and strengthen its business operations.
Apart from the expansion into Indonesia, PDZ has sold its main operating unit, Perkapalan Dai Zhun Sdn Bhd in 2016.
This was done to reduce the number of operating units that are no longer needed for future operations. In line with its restructuring exercise, PDZ has also undertaken a rights issue to generate additional capital for its upcoming regional expansions. The cash call exercise aims to raise total proceeds ranging between RM15mil to RM43mil.
PDZ’s move to generate extra cash may be dampened to an extent, as its substantial shareholder will not participate in the exercise. A source tells StarBizWeek that PMB has no plans to subscribe to its entitlement under PDZ’s rights issue exercise.
“With total disposal of stake in mind moving forward, there is no reason for PMB to participate in the corporate exercise,” says a source. In the case of minimum subscription level, PMB’s stake in PDZ will drop to 13.78%.
The exercise offers up to 434.66 million new ordinary shares at an issue price of 10 sen per rights share.
This comes together with up to 325.99 million free detachable warrants on the basis of four rights shares together with three free warrants for every two existing PDZ shares.
In order to raise a minimum of RM15mil in proceeds from the exercise, three shareholders, (Tan, Kua Khai Loon and Cheng Kim Liang) have provided irrevocable agreement to subscribe in full their respective entitlements under the rights issue. This is to reach minimum subscription level.
In the event of only these three shareholders subscribing to the rights issue, they will collectively own a stake of 41.11%, compared to only 0.48% currently.
Ultimately, Tan, who is PDZ’s CEO, will become the container shipper’s single largest shareholder, in the event of minimum subscription level. He will hold a stake of 16.4%.
Kua and Cheng will own equity interests of 12.45% and 12.26% respectively.