Short Positions - Vertice maximises Zenith stake


When Lembaga Tabung Angkatan Tentera (LTAT) announced that Nik Amlizan Mohamed (pic) has completed her two-year tenure as chief executive of LTAT, it came as a bit of a surprise.

Vertice maximises Zenith stake

CONSTRUCTION companies are having a tight cash flow situation with the dearth of projects and tight margins.

The situation is even worse for construction companies like Vertice Bhd that has the bulk of its projects in Penang.

Vertice is proposing to raise RM60mil through the issuance of redeemable convertible preference shares (RCPS) to two funds.

The funds – Advance Opportunity Fund and Advance Opportunity Fund I – are taking up the whole block that comes with an option to possibly have a stake in Consortium Zenith Construction Sdn Bhd in three years.

Consortium Zenith is the master developer of the RM6.3bil Penang Undersea Tunnel project where progress has been slow because of the soft economic environment. Consortium Zenith is to fund the project through the sale of sea-fronting reclaimed land, which is also hard to do due to weak demand.

Vertice has a 12.05% in Consortium Zenith, which is part of the collateral for the proposed issuance of the three-year RCPS.

In the proposal that was announced earlier this week, Vertice proposes that the subscribers of the RCPS have a call option on the 12.05% block should the company be unable to redeem the preference shares or get it converted to ordinary shares in the company.

Previously, the 12.05% block was viewed as key to Vertice securing more jobs in the Penang Undersea tunnel project.

So far, it has a 50% stake in a joint venture that has a RM815mil job to undertake one of three highways being built to disperse traffic from the tunnel.

Vertice has two other jobs but its role is confined to being a sub-contractor.

The subscribers of the RCPS have probably seen the value in Vertice, which is why there is a call option in their favour with regards to its stake in Consortium Zenth.

The two funds taking up the RCPS are no novices to the corporate scene.

They have taken up RCPS in at least five other listed companies, including Hubline Bhd and Alam Maritim Resources Bhd.

The reasons for Vertice to propose such a deal is to get the funds in quickly. It has three years to redeem the papers or get them converted.

Otherwise, Vertice may lose its stake in Consortium Zenith.

Bintai injects spice into vaccine race

Of all the companies jumping into the vaccine bandwagon in recent weeks, Bintai Kinden Corp Bhd does stand out.

For starters, it is not merely talking about getting distribution rights from vaccine players abroad.

Instead, it plans to take part in clinical testing of a particular vaccine from a US-based biotechnology firm

It just inked a memorandum of understanding with Institut Jantung Negara Sdn Bhd (IJN), which seeks to make IJN the clinical research organisation and the study sites for Bintai Kinden.

The group had earlier partnered with US firm Generex Biotechnology Corporation to commercialise the Ii Key-SARS-CoV-2 vaccine in Malaysia based on three stages, namely the full import in naked vial, fill and finish and local manufacturing.

While the announcement does sound promising, it is not a sure thing that loss-making Bintai Kinden will reap huge profits from this planned venture.

Forget the manufacturing, even the logistics involved in vaccines is no child’s play.

From point A to B, everything has to be in a controlled environment, from the production to the safekeeping, transportation to the next country, storage and finally the transportation to the end user.

Any fluctuation in temperature will render the vaccine useless.

Precision is key so the typical cold rooms just would not cut it.

The other thing, of course, is whether it would be financially viable.

The profit margin for distribution is just too low.

The bottling process yields higher margin but that comes with a high initial outlay.

Is it worth the resources only for the Malaysian market of 30 million people?

And that is, if everyone opts for that one vaccine.

Furthermore, the world is still a far way off from having a vaccine. Even the World Health Organisation does not expect widespread vaccinations until mid-2021, as it is of utmost importance to determine the effectiveness and safety of the vaccine first.

Perhaps, with recent events suggesting a second wave of the pandemic, with even US President Donald Trump infected, the vaccine race could accelerate.

Watching over the soldiers

When Lembaga Tabung Angkatan Tentera (LTAT) announced that Nik Amlizan Mohamed (pic) has completed her two-year tenure as chief executive of LTAT, it came as a bit of a surprise (see page 8).

She was hired to restructure the holdings of LTAT which was heavily skewed towards its holdings in the Boustead Group of companies and it was a tough job to execute given what the market conditions were and the overall situation within the fund.

There was no doubt that the task before her was going to be difficult. Even though the facade of LTAT was that of strength, the internal workings and assets suggest otherwise.

She had articulated the course the fund will need to embark on with a transformation plan and reforms that need to be undertaken.

With her now departing and chief investment officer Mohd Haniz Mohd Nazlan to cover for her duties as chief executive in the interim, the question now is who will replace her and what will become of the transformation plans that have already been put in place?

Certainly with LTAT being a fund for the soldiers, the Defence Ministry will have its say, but LTAT does own a bank through Boustead Holdings and that may mean input from the Finance Ministry. The question is what the future direction of the fund will be with any new appointment being made.

Nik Amilzan was brought in to straighten things up within the fund. The ultimate beneficiary of what LTAT makes are the soldiers and anyone who takes over needs to keep that in mind.

A professional must take the helm to ensure dividends improve in a sustainable and structured manner, which was the journey Nik Amlizan started LTAT on.

The market will watch with bated breath to see who will take over, and if he/she will be committed to the reforms Nik Amlizan has put in place.

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LTAT , Nik Amlizan , Vertice , Zenith , Bintai , Vaccine ,

   

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