Short Position

Ship-to-ship clean-up

THE move by the federal government to introduce a new ship-to-ship (STS) transfer hub in the waters of Johor has many positives, although execution will be key. To recap, the plan is to build what is being touted as the world’s largest STS hub off Johor’s Port of Tanjung Pelepas. The project also entails the entry of Hutchison Ports as a 30% shareholder of the proposed STS hub. This indicates a certain level of professionalism that should come into that area of business, where a lot of opaqueness exists currently. For example, it is difficult to know for sure how many actual operators of STS are presently running in the Johor Straits. It is also unclear who all the owners are (although some are clear) and what kind of revenues and profits they earn. What is impressive about the new STS hub is its grand plan. In a nutshell, it will have mooring structures to berth vessels without the need for piers or docks and at a lower cost for shippers. It will be able to accommodate up to 30 vessels at one time.

The hub, expected to be ready in 2021, will also be able to store nine million tonnes of petroleum products. None of the existing STS operators can come close to this. It will be in a position to win business from Singapore’s Tuas mega port. It is only logical for the new hub to eventually replace the scattered list of current STS operators there. The government of Malaysia is likely to gain from increased taxes and fees. But execution will be key. Indications are that the project will be privately funded. It should also be revealed that existing STS operator, KA Petra Sdn Bhd, was chosen as the party to lead this project and that more needs to be revealed about its credentials as the major owner of the new STS hub.


Changes at Hock Heng

A SUBSTANTIAL block of shares has changed hands in nondescript Hock Heng Stone Industries Bhd, a company that is into the manufacture and distribution of dimension stones.

The Low family used to control the company with a 45.47% stake. Their interest in Hock Heng Stone was held through a private vehicle, Jasa Maju Sdn Bhd.

Yesterday evening, Jasa Maju ceased to be a substantial shareholder of Hock Heng Stone.

Instead, two private companies emerged as substantial shareholders holding a total of 43.43%. The two companies are Shi Ji Dong Fang (M) Sdn Bhd that emerged with a 29.78% stake and Paddington Hospitality Sdn Bhd, which announced that it had acquired a 13.64% interest in Hock Heng Stone.

Although Shi Ji Dong Fang and Paddington Hospitality have different offices, it could not be a mere coincidence that they emerged with substantial blocks of shares in Hock Heng Stone on the same day.

So far, the three Low brothers are still sitting on the board of the company. However, they are joined by two new appointments that were announced early this month.

One of them is Tengku Sulaiman Shah from the Selangor royalty who was appointed as independent director on April 4. The other new appointment to Hock Heng Stone is an Indonesian, Dr Suntoro Tjoe, who was also appointed on the same day.

Are the new board appointments representing the new companies that have emerged in Hock Heng Stone? Are Shi Ji Dong Fang and Paddington Hospitality connected? Ironically, Hock Heng Stone undertook a private placement of 10% of its shares in March this year. The shares were placed out at 55 sen each, raising RM4.4mil. The money was used to pay off debts and as working capital.

It begs the question as to why Hock Heng Stone undertook a share placement in March only to see the private company holding the controlling bock of shares divesting its stake a month later.

More certainty for airport REIT

Malaysia Airports Holdings Bhd‘s (MAHB) operating agreements (OA) with the government to operate, manage and maintain the country’s 39 airports have been extended by 35 years to 2069. This adds some level of certainty to the impending formation of the world’s first airport real estate investment trust (REIT), first proposed by Finance Minister Lim Guan Eng during his Budget 2019 speech last year. Moving forward, the government hopes to raise RM4bil from selling a 30% stake in the REIT to private investing institutions.

To be sure, the government owns all the physical assets of the airports nationwide, while MAHB is the concessionaire that operates, manages and maintains them. The move to establish the REIT will also see the local aviation industry going towards what analysts call a user-funding model instead of a model which uses the government’s coffers for airport upgrades.

In its announcement yesterday, MAHB said the OA extension would give it the rights to manage the existing 39 airports and short take-off landing airports in Malaysia until Feb 11, 2069. The existing OA was for 25 years from Feb 12, 2009. The current OA and lease agreements will be superceded and replaced with four new OA, which are the OA for KLIA, OA for designated airports in Peninsular Malaysia, OA for Sabah airports and OA for Sarawak airports (new OAs) and new lease agreements, respectively. Interestingly, MAHB shares started to move upwards shortly before this news broke and was trading 14 sen higher at RM6.75 at mid-day. It was on the top of the gainers’ list when the market resumed after the mid-day break. Notably, the share price of the airport operator had fallen over the past week on concerns surrounding the impact of an impending passenger departure levy. Earlier this week, the Finance Ministry said that a departure levy would be imposed on those flying out of the country.

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