PETALING JAYA: The low profile Loh family of Oriental Holdings Bhd is in a transition phase. The baton is slowly being passed from the second to the third generation, in particular Loh Kian Chong, said a fund manager with a regional asset management company that has been accumulating shares in the automotive and plantation group.

Kian Chong, 36, is the son of Loh Kar Bee, the eldest and only surviving son of the late Tan Sri Loh Boon Siew. Kian Chong’s name has been appearing regularly on Bursa Malaysia filings of late. Since late February, he is deemed to have been accumulating Oriental shares on the open market.

The purchases of some 3.75 million shares representing a 0.6% stake in Oriental were made by Southern Perak Plantations Sdn Bhd (SPP), which is 48.3% owned by the Loh family vehicle Boon Siew Sdn Bhd, according to data from the Companies Commission of Malaysia (SSM).

It is worth noting that only Kian Chong’s name appears in the Bursa filings, as he is deemed the purchaser of the shares by SPP because he is the only family member who holds more than 15% of Boon Siew. In fact, he is deemed to own 38% of Boon Siew, while the other branches of the family are deemed to hold 11% each, according to an Oriental circular to shareholders detailing the recurrent related party transactions within the family.

Based on calculations by The Edge Financial Daily, the recent share purchases by SPP, at prices from RM6.13 to RM6.38, cost RM23.36 million. It may be a small amount for the family but this could be one of the more aggressive open market share purchases by the Lohs in Oriental in the last 10 years. As at March 20, Boon Siew via SPP owned 341.71 million shares or a 55.08% stake in Oriental.  

“There has been a succession plan in place to pass the leadership of Oriental, the family’s listed flagship, to Kian Chong. This has been done slowly to allow him enough time to be prepared before taking over the top post,” the fund manager, who is familiar with the group, told The Edge Financial Daily.

He said Kian Chong has been tasked with Oriental’s plantation business portfolio, and is being mentored by his uncle Datuk Lim Su Tong, the current chief executive of the group’s plantation and property businesses.

He added that the move by the group’s board of directors to task Kian Chong with the plantation business shows that he is being prepared to take over the group’s top leadership in the near future. Note that plantations have increasingly become the biggest earnings contributor to the group, which has been expanding its landbank in Indonesia.

However, the fund manager advised that any leadership transition at Oriental will be done slowly. The group is led by a conservative family and they do not like to change things too fast. Indeed, Kian Chong first became a substantial shareholder in Boon Siew as early as 2001, taking over from Kar Bee, and then became deputy chairman in the private company in 2007. He subsequently joined Oriental’s board as executive director in 2009.

Kian Chong, who holds a Bachelor of Business in Property degree from the Royal Melbourne Institute of Technology, is one of the two third-generation family members in Oriental’s management line-up. His cousin Tan Hui Jing, 31, is alternate director to his father Datuk Dr Tan Chong Siang, who is married to Boon Siew’s youngest daughter Gim Ean. Hui Jing is an executive director and chief sales and marketing officer of Boon Siew Honda Sdn Bhd.

Oriental’s board now includes Datuk Loh Cheng Yean (executive chairman and second daughter of Boon Siew), Datuk Robert Wong (co-managing director), Datuk Lim Su Tong (co-managing director) and Tan (non-executive director), a medical specialist by profession. Wong is the husband of Boon Siew’s eldest daughter Loh Ean, while Lim is married to third daughter Phoy Yen.

“The family don’t like drastic change. They have been doing things slowly, such as shifting the group’s focus to oil palm plantations, apart from automotive. They have a long-term mentality in driving Oriental forward, and this is what we like about them,” the fund manager said.

Despite the lack of analyst coverage on the stock, Oriental has gained a lot since the beginning of the year. It has risen by 19% to close at RM6.38 yesterday, giving it a market capitalisation of RM3.95 billion, from RM5.35 on Jan 3, 2012.

Over the past 12 months, the stock has increased nearly 25% from RM5.09 on March 21, 2011, due to more active corporate developments (such as acquiring hotel assets in London for over RM200 million) as well as strong plantation earnings that amounted to RM195.2 million, representing 44.2% of group operating profit of RM441.6 million in FY11 ended December. For FY11, group net profit was RM288.5 million, an increase of 16% from the preceding year.

Amid the gains of its share price, Oriental recently denied being in any kind of privatisation exercise by Boon Siew, or an immediate leadership change. But one thing is certain, according to market observers, the group is firmly in the hands of the Loh family via a web of cross holdings.

Note that while Boon Siew holds 48.3% of SPP, which has been buying shares in Oriental lately, SPP’s other shareholders include Oriental itself with a 14.5% stake, followed by Oriental Realty Sdn Bhd (13.6%), Oriental Rubber & Palm Oil Sdn Bhd (11.5%), Boon Siew Development Sdn Bhd (7%) and other family-related companies that hold the remaining shares in SPP.

This article appeared in The Edge Financial Daily, March 23, 2012.