This article first appeared in The Edge Malaysia Weekly on April 17, 2017 - April 23, 2017

THE London High Court judge’s decision on the divorce settlement of £64 million (RM352.9 million) to Tan Sri Dr Khoo Kay Peng’s ex-wife, Pauline Chai, two weeks ago has stirred investor interest in his flagship company, Malayan United Industries Bhd (MUI). But whether chairman and chief executive Khoo will monetise his assets to pay the settlement remains to be seen.

MUI’s shares saw a flurry of trading activity last week. The counter was the most active on Bursa Malaysia last Thursday, with a trading volume of 167.84 million shares, surpassing its 200-day average volume of 3.29 million shares.

The stock hit a two-year high of 28 sen last Tuesday, giving the company a market capitalisation of RM821 million. Given that the 78-year-old Khoo owns 47.67% of MUI, his stake is worth RM391 million.

“There are those who perceive the reaction of the market as a relief rally, considering that they were expecting half of his (Khoo’s) assets to be awarded to his ex-wife. So when it was reported in the UK newspapers that she was going to get a £64 million payout, there was a sense of relief among investors because that’s [about 31%] of what she had claimed he was worth, which was at least £205 million,” a market observer says.

He adds that the market probably sees that with the lengthy divorce proceedings out of the way, Khoo may be able to concentrate on his businesses and may even restructure the group.

However, these are all speculation at this point, with some even talking about an asset monetisation exercise.

“There is speculation that he may sell some of MUI’s assets as a result of the divorce settlement, but nothing is concrete yet as these are just market rumours,” the market observer says.

It is unclear at this point which of Khoo’s assets are to be apportioned to his ex-wife. According to UK newspapers, the judge who presided over the case, Justice David Bodey, has barred the reporting of confidential financial information pertaining to the case.

However, it is understood that the £64 million payout to Chai will be in cash and property.

The assets on MUI’s balance sheet consist of investments in various business segments, including retail, hotels, food and property. The hotel segment formed more than half of the group’s total assets as at June 30 last year. The group owns and operates two hotels in Malaysia and 10 in the UK under the Corus and Laura Ashley brands. They include Corus Hotel in Jalan Ampang, Kuala Lumpur, and Corus Paradise Resort in Port Dickson, Negeri Sembilan.

The KL hotel could fetch as much as RM310 million, according to property consultant, valuer and estate agent VPC Alliance (KL) Sdn Bhd.

“With a land size of 78,458 sq ft, freehold tenure and being in a super prime location facing the KLCC development, the Corus Hotel site is indeed ripe for redevelopment and will be able to fetch a value of between RM300 million and RM310 million, based on RM3,800 to RM4,000 psf,” says VPC Alliance managing director James Wong.

Over in the UK, the group’s flagship hotel is the 389-room Corus Hotel Hyde Park at Lancaster Gate, London, a historic building reported to be more than 100 years old. MUI bought it in 2001, and its net book value as at June 30 last year was RM264.26 million.

Back in September 2014, news reports emerged that Khoo was looking to sell the hotel for £200 million. However, in an Oct 1, 2014, filing with Bursa Malaysia, MUI denied the news reports.

Also part of MUI’s UK assets is Laura Ashley Hotel The Belsfield in the Lake District.

As for its retail division, the group owns 98.21% of Metrojaya Bhd and 35.17% of Laura Ashley Holdings plc. As at June 30 last year, Metrojaya, which is a leading department store chain in Malaysia, operated seven department stores and 61 speciality stores under various in-house brands — Living Quarters, Reject Shop, East India Company and Somerset Bay, to name but a few. It also operated seven Laura Ashley franchised stores in Malaysia and Singapore.

Khoo is also the chairman of London-listed Laura Ashley Holdings, which operates 194 stores in the UK, Ireland and France, and 252 franchised stores in 29 territories worldwide. The stock is trading at 14.38 pence a share, giving the company a market capitalisation of £104.6 million, which values MUI’s stake in the company at £36.8 million.

The group’s food division is engaged in the manufacture and distribution of chocolates and other confectionery under Network Foods International Ltd, which owns brands such as Tudor Gold, Crispy, Tango and Kandos.

Considering the myriad of assets that MUI has, news of asset disposal is not new. In December 2014, the group had proposed to dispose of its 69.192% stake in Pan Malaysia Holdings Bhd for RM77.12 million to renowned investor Datuk Dr Yu Kuan Chon, who is also the chairman of YNH Property Bhd.

The acquisition was widely perceived as Yu’s move to build a stockbroking business through Pan Malaysia Holdings’ 34.84%-owned Pan Malaysia Capital Bhd, which in turn owns 99.99% of stockbroking firm PM Securities Sdn Bhd.

However, the group and Yu mutually terminated the share sale agreement on Sept 12 last year due to the condition precedent not being fulfilled by the date.

MUI’s financial performance has not been great. For the six months ended Dec 31, 2016, the group reported a net loss of RM30.66 million on the back of RM213.8 million in revenue mainly due to foreign exchange losses. In 2015, the group changed its financial year end to June from December.

With no catalyst in sight, the spotlight on MUI falls back on Khoo’s high-profile divorce case. It is worth noting that apart from his publicly traded assets, Khoo would have sizeable assets held privately. Besides, some reports state that the tycoon could challenge the award to Chai. Undoubtedly, the market will be watching and waiting for Khoo’s next move.

Save by subscribing to us for your print and/or digital copy.

P/S: The Edge is also available on Apple's App Store and Android's Google Play.