This article first appeared in The Edge Malaysia Weekly on November 11, 2019 - November 17, 2019

THE recent emergence of Taiwanese businessman Jerry Kuo Jen Hao as Mudajaya Group Bhd’s new major shareholder has intrigued many investors.

Market participants are not only burning with curiosity about the who and the why, but many are also placing big bets on the company’s prospects, which is evident in the doubling of Mudajaya’s share price to a six-month high in just three trading days.

Mudajaya group managing director and CEO James Wong Tet Foh says Kuo’s investment in Mudajaya — a result of careful deliberations — is timely and a win-win deal for Kuo and the company.

Wong is of the view that the company piqued Kuo’s interest due to its competence in engineering, procurement, construction, and commissioning and its exposure to the renewable energy (RE) sector.

He says management has exchanged communications with Kuo over the company’s business plans and that the latter is “keen for the company to carry on” with them. “Having a construction arm and, given its experience and track record, the company can easily share some of Kuo’s projects — in real estate or infrastructure — in the region. As you know, the Malaysian (construction) market has become very quiet. Construction companies here are looking outside the country to maintain their order books, so the same can be said (for Mudajaya). I think the timing is quite good.”

On Nov 1, Mudajaya announced Kuo as a new substantial shareholder after Yakin Setiamas Sdn Bhd acquired 162.33 million shares, or a 27.52% stake, from long-time shareholder Dataran Sentral (M) Sdn Bhd.

Yakin Setiamas is 90% owned by Kuo’s vehicle, Ample Full Profits Ltd, and 10% by Chamber Jewels Ltd, in which Wong and executive director and chief financial officer Eric Lee Eng Leong each hold 50% equity interest.

Who is Kuo?

Believed to be in his early forties, Kuo is an accountant turned businessman best known as the chairman and president of First Steamship Co Ltd, a Taipei-based, TWD7 billion (RM950 million) shipping and retail company listed on the Taiwan Stock Exchange.

The company, which operates a fleet of 10 vessels and 17 Grand Ocean department stores in China, reported a full-year net profit of TWD6.4 million on TWD8.04 billion in revenue last year, according to its annual report.

More recently, Kuo was in the news after First Steamship told a media briefing it was considering an offer for its 19% stake in Hong Kong-listed casino operator Summit Ascent Holdings Bhd for at least HK$429 million (RM226 million). Summit Ascent operates a casino and hotel in the Tigre de Cristal resort in Russia.

According to Wong, Kuo’s business expertise spans various market sectors such as logistics and property. Although the RE sector is relatively new to him, Kuo views Mudajaya as a good platform to grow the RE business within the region. “Taiwan has its own programme akin to China’s Belt and Road Initiative and the investment in Mudajaya is part of Kuo’s efforts to expand in this region. Malaysia and other Southeast Asian countries, including Indonesia, Myanmar and the Philippines, should be the focus of Kuo’s and Mudajaya’s growth plans [going forward],” says Wong.

For its part, Mudajaya has come a long way. In 2011, the company went through boardroom changes after its major shareholder, Ng Ying Loong (who holds his interest via Dataran Sentral and Mulpha Infrastructure Holdings Sdn Bhd), stepped down as joint managing director, sparking speculation of the possible emergence of new shareholders. There was also talk at the time of a takeover of Mudajaya by tycoon T Ananda Krishnan’s Tanjong PLC.

Investors seem upbeat over the change in Mudajaya’s ownership. Its share price has held up after nearly doubling from 18.5 sen on Oct 25 to 36 sen on Oct 31. At last Friday’s close, Mudajaya had settled at 34 sen, valuing the construction, power and property player at RM200.56 million.

With Kuo’s entry, Mudajaya’s largest shareholders are now Yakin Setiamas (27.52%), followed by Urusharta Jamaah Sdn Bhd (9.13%) and Fairfax Financial Holdings Ltd (5.09%), Bloomberg data shows.

What’s next?

With Dataran Sentral ceasing to be a major shareholder, it is likely non-independent non-executive director Wee Teck Nam will withdraw from his position, calling for a board recomposition. Wee is deemed to have interest by virtue of his shareholdings in Dataran Sentral and Kingsman Capital.

“There will be changes to Mudajaya’s board composition … However, who else will be joining is still under discussion.

“Being a substantial shareholder, Kuo can ask for a board seat but it would really depend on what his wishes are. He may do so or decide to put forward a representative,” says Wong, adding that he and Lee remain committed to the company. Wong and Lee were appointed to Mudajaya’s board in 2014 and 2012, respectively.

“When Kuo approached Mudajaya, he wanted to ensure the continuity of the company’s key personnel and to instil more confidence in shareholders, that was why myself and Eric were offered the stake [through Chamber Jewels]. And once the restructuring exercise is out of the way, Mudajaya’s focus will be on selling power. The power purchase agreements (PPAs) are all in place, with just some documentation left,” he says.

Mudajaya is hoping to start selling power soon from the second, third and fourth units of its coal-fired thermal power plant in India, Wong says, which is being undertaken by RKM Powergen Pvt Ltd in which Mudajaya owns an 18.93% stake. The fourth and final unit of the plant achieved its commercial operation date in March.

Mudajaya will also work on strengthening its balance sheet and reducing its gearing to a reasonable level, which could use some help from Kuo, apart from the proceeds from its private placement exercise that is expected to be completed by year-end.

“Mudajaya has done a lot of good work over the last few years. Although it was difficult, with India being a big challenge, the company is turning a corner on our India [investment] now. From there, it will be plain sailing,” Wong says.

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