Short Position

THE shareholder tussle at tile-maker Seacera Group Bhd is back to the drawing board after a series of explosive shareholder meetings.

What next for Seacera?

THE shareholder tussle at tile-maker Seacera Group Bhd is back to the drawing board after a series of explosive shareholder meetings.

On Nov 29, a total of 21 individuals had fought for board seats at the firm, possibly the highest number in the history of a company that size or any size for that matter.

There were a staggering 36 resolutions at the AGM and all were conducted by a poll. Only 15 were carried.

Safe to say, the ones who are suffering the most right now are the minority shareholders.

The company’s most recent quarterly results show that Seacera had registered a net loss of RM6mil.

Its stock, meanwhile, has traded in a volatile manner, trading between 17.5 sen and 56.5 sen in the past one year. It last closed at 26.5 sen.

Seacera, as most who track the company already know, has for some time been a subject of a heated tussle.

And given the slew of litigation that continues to be announced to the stock exchange, minorities sure have nothing to cheer about.

Additionally, the company - which is a property developer - is a Practice Note 17 company.

The centre of the brouhaha appears to be some 501 acres of land in Semenyih, Selangor.

According to Seacera, based on a 2016 valuation, the market value of this parcel of land is approximately RM786.43mil.

However, the land, according to a report, may not be fully suitable for development and is said to be tied to debt.

Seacera owns 51% of this piece of land on paper.

At the AGM, there were videos of physical shoving happening. This is not the way to behave as a corporate entity, regardless of what’s at stake.

Since that meeting on Nov 29, though, all has been quiet, save for the continuous string of litigation being announced.

So, what’s next for Seacera?

As a public-listed company (PLC), the pressure should be on for it to get back to business as usual.

No one should use a PLC as their personal vehicle to self-benefit.

Westports poised for expansion

Westports Holdings Bhd, which handled 10.8 million containers last year, has taken another step to prepare itself for expansion.

The company is proposing to acquire 361.76 acres of land near its existing facility to create one of the longest linear ports in the region. The leading port operator in the country is proposing to pay RM394mil to purchase the land from Pembinaan Redzai Sdn Bhd, which is privately held by Westports’ major shareholder, Tan Sri G Gnanalingam.

In December 2018, Westports purchased 381 acres of land in the same vicinity from the Selangor State Development Corp (PKNS) for RM116mil. However, the land from PKNS is partly under water and needs reclamation works before it can be utilised.

Westports plans to expand its port operations by building another seven berths in an expansion that would cost the company RM10bil over a period of 25 years.

The port operator is paying for the land in cash, just like how it had purchased the land from PKNS. This strategy of purchasing more land with the view of expanding the existing port effectively rules out Westports from embarking on any acquisition of ports within or outside the country to grow the business.This is probably the strategy Gnanalingam is taking at the moment, considering that Singapore is constructing a port with a capacity to handle 60 million containers annually.

The port business is competitive due to the reducing number of shipping liners worldwide. The container vessels are getting bigger and only call on ports that can provide them with the volume to fill up the ships.

Put in a nutshell, size and volume are key to win over shippers, which is why Singapore is building a super-large container port.

Malaysian port operators will have to follow suit.

All eyes on bank dividends

There is no question that the three banks Bank Negara has identified as crucial to the domestic banking sector are well-capitalised and capable of meeting the additional capital requirements.

However, there are concerns on the dividend-paying ability of the three - Malayan Banking Bhd, CIMB Group Holdings Bhd and Public Bank Bhd – should they adopt to maintain a higher capital ratio than the industry average.

According to the rating agencies, the three banks, which have been identified as domestically systemically important banks (D-SIBs), would comfortably be able to meet the capital ratios.

It has been stated that Bank Negara’s latest framework to prevent a “too big to fail” situation was positive for the domestic financial sector, and was, in fact, less stringent compared to the requirements imposed on other countries in the region.

The rating agencies also stated that the banks would not need to raise additional capital to meet the requirements.

Nonetheless, the dividend payout ratio of these banks could come under some strain if there is a drop in their profitability and ability to meet the above industry average capital requirements.

Affin Hwang Capital Research stated in a brief note that although the three banks do not have to raise additional capital to meet Bank Negara’s requirement, their dividend-paying ability could come under some constraints.

The research house added that the dividend payouts from these banks would also depend on their profitability.

Since the 1998 crisis, the central bank has taken a proactive role in ensuring the stability of the financial system. Banks are well-capitalised and have been able to withstand several international crises.

The new framework adds another line of buffer in capital requirements of the large banks. However, it should not be at the expense of reducing dividend payouts.

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