HE has said it once, he has said it many times – the market doesn’t know how to value his companies.
Berjaya Corp Bhd (BCorp) founder and executive chairman Tan Sri Vincent Tan can only speculate on the reason why most fund managers find it difficult to understand the business of his diversified conglomerate.
For BCorp specifically, the 66-year-old tycoon quips that the business model resembles “rojak”, implying that it is too diversified.
“It is a conglomerate, so it owns many things. So, some may not understand (BCorp’s business model),” Tan says.
While there is a tendency of markets to value a diversified group of businesses and assets at less than the sum of its part, the so-called “conglomerate discount” applied to BCorp has been unjustifiably excessive, in Tan’s view.
However, one analyst challenges that notion by pointing out that BCorp’s financial performance has neither been impressive nor consistent in recent years.
“There are reasons why the counter lacks appeal. It is not a yield play to begin with, and its financial performance has not been very impressive or consistent in recent years,” the analyst with a foreign brokerage explains.
Be that as it may, Tan, who returned to the helm of the Berjaya group in November last year after a five-year hiatus, is undertaking a strategic review of his businesses in the hope of improving their performance.
According to sources, Tan has been meeting up with bankers as far back as a year ago, seeking to sell BCorp’s assets as part of a plan to restructure his business empire.
“BCorp is asset-heavy, but light on cash flow. In a liquidity crunch, the group will definitely be hit. So, better sell now for the potential storm ahead,” the source tells StarBizWeek.
“And Tan wants to sell ‘everything’ – but at a very high premium. Hence, there have been some challenges faced in his attempt to dispose of some of his prized assets,” he adds.
Nevertheless, the source points out that Tan’s track record shows that the tycoon has the ability to hang on to his assets until he gets the “right price”, citing the case of Digi.Com Bhd .
In 1999, Tan sold his stake in Digi, which was then known as Digi.Swisscom Bhd, and walked away from the investment with a bounty estimated at more than RM1.5bil.
As at end-July, BCorp’s total assets stood at RM20.5bil, with cash and cash equivalents totalling RM1.3bil. The group had debts totalling RM5.8bil, of which, RM3.2bil were short-term obligations.
Tan has penchant for getting the top dollar