This article first appeared in The Edge Malaysia Weekly on May 11, 2020 - May 17, 2020

IN August 2006, when the plan to privatise Selangor state-controlled property developer Worldwide Holdings Bhd was announced, among the reasons given was that the share price of the developer did not reflect the actual value of the company.

The offer to privatise Worldwide by Perbadanan Kemajuan Negeri Selangor, which owned 51% of the company then, was RM3.50 a share, taking into account the one-year weighted average market price of RM2.08 for its shares. As at end-September 2006, Worldwide’s net asset per share was pegged at RM4.23, meaning the offer was at a 17% discount to its asset base.

Now, 15 years later, publicly traded entities controlled by the various states are a mixed bag, with some faring well while others plod along bleeding losses. Nevertheless, with these companies being publicly traded, at least there is some form of scrutiny.

One fund manager from a foreign broking house says he cannot remember the time when any entity controlled by a state generated his interest.

“Maybe for the wrong reasons like Perak Corp Bhd, where the CEO was charged for corruption. [The case is still being contested in court.] Some of them are illiquid, which makes it difficult to exit. Things are also very different at these companies, in that a management team that fails in showing profitability can go on running the company for years,” he says.

“At one time, there was some [interest in] KPS (Kumpulan Perangsang Selangor Bhd) when it was selling its 30% in SPLASH (Syarikat Pengeluar Air Sungai Selangor Sdn Bhd). This was a few years ago, but even that [sale] took many years to complete. I generally don’t bother with these companies,” he says candidly.

The better ones

Possibly the most prominent of the publicly traded state-run enterprises, KPS posted a net profit of RM28.28 million from RM867.48 million in revenue in its financial year ended December 2019.

KPS has a hand in manufacturing, trading, infrastructure, utilities and property investment, and more than 64% of its equity is held by the Selangor state.

While net margins at 3.26% is thin, at least KPS is profitable.

As at end-December last year, the company had cash and bank balances and short-term funds of RM271.76 million. On the other side of the balance sheet, it had long-term debt commitments of RM507.7 million and short-term borrowings of RM108.91 million. To its credit, KPS had retained earnings of RM419.56 million as at the end of last year.

KPS’ cash per share works out to 50.6 sen, about 85% of its closing price of 59.5 sen last Wednesday. In other words, all its other assets and businesses are worth only 9.35 sen.

KPS’ net asset per share as at end-December 2019 was RM1.78, in contrast to its share price, which has been below RM1 since last July. At its close at 59.5 sen on Wednesday, KPS had a market value of RM319.74 million.

It is also noteworthy that in May last year, KPS paid out a bumper dividend of 32.6 sen a share (RM175.19 million in total), after selling its 30% stake in water treatment outfit SPLASH to Pengurusan Air Selangor Sdn Bhd for RM2.55 billion.

PBA Holdings Bhd, which is at least 69% controlled by the Penang state, is also one of the better-known state-run enterprises. PBA has a mainstay in water treatment.

For its financial year ended December 2019, PBA chalked up net profits of RM25.15 million from RM340.2 million in sales. A year ago, it suffered a net loss of RM103.43 million from RM334.76 million in sales.

As at end-2019, PBA had cash and cash equivalents of RM157. 96 million while long and short-term debts stood at RM54.85 million and RM6.2 million respectively. It had reserves of RM350.84 million.

Its cash per share stood at 47.72 sen, or 53% of its close of 90 sen last Wednesday. Interestingly enough, its net asset per share was RM2.05 as at end-December.

Sabah’s Suria Capital Holdings Bhd generates most of its earnings from port operations. The company is about 51%-controlled by the Sabah government and registered net profits of RM52.23 million from RM275.22 million in revenue for its financial year ended Dec 31, 2019.

As at end-December Suria Capital had cash and bank balances of RM70.9 million and investment securities valued at RM43.91 million. For the period in review, the company had short-term borrowings of RM22.38 million and negligible long-term debt commitments. Retained earnings stood at RM753.08 million.

The company’s stock has been gaining traction lately, with trading volume increasing, and it closed last Wednesday at RM1.01, giving it a market capitalisation of about RM355 million.

The company’s dividend yield was about 5%.

While Suria Capital runs the Sabah Ports, in Sarawak, Bintulu Port Holdings Bhd runs a terminal in the northern part of the state. The Sarawak government controls 39.71% of Bintulu Port and Petroliam Nasional Bhd (Petronas) holds 28.51% equity interest. Other substantial shareholders as at end-February included Kumpulan Wang Persaraan (Diperbadankan) (KWAP), with 9.14%; Permodalan Nasional Bhd and its various funds holding 5.83% equity interest; and the Employees Provident Fund (EPF) holding 5.27%.

For its financial year ended December 2019, Bintulu Port raked in RM129.30 million in net profits from RM716.42 million in revenue.

As at end-December 2019, Bintulu Port had cash and cash equivalents of RM694.7 million and investment securities of RM124.85 million. It had non-current liabilities of RM938.83 million and no short-term borrowings as well as retained earnings of RM439.28 million.

Bintulu Port’s cash per share stood at RM1.51 while net asset per share was RM2.89. Its stock closed at RM4.35 last Wednesday, giving the company a market value of RM2 billion.

Then, there is hospital and medical centre operator KPJ Healthcare Bhd, in which state investment arm Johor Corp has 45.43% equity interest.

For its financial year ended December 2019, KPJ chalked up net profits of RM211.37 million from RM3.6 billion in revenue.

As at end-December, the company had deposits, bank and cash balances of RM478.33 million. It had long and short-term borrowings of RM1.47 billion and RM289.51 million respectively.

Last Wednesday, KPJ ended trading at 87 sen, translating into a market capitalisation of almost RM3.75 billion.

The others

Kedah’s 67.28%-controlled Bina Darulaman Bhd registered net profits of RM5.07 million from RM257.54 million in revenue for its financial year ended December 2019. In the previous financial year, the property developer suffered a net loss of RM42.2 million on the back of RM203.39 million in sales.

As at end-December, Bina Darulaman had cash and bank balances of RM57.37 million and bank deposits amounting to RM18.23 million; current liabilities and long-term borrowings stood at RM102.44 million and RM29.16 million respectively. In addition, it had retained earnings of RM132.71 million.

At its close of 27.5 sen last Wednesday, the company had a market value of RM83.56 million. As at end-December, Bina Darulaman’s net asset per share was RM1.53.

Amanah Saham Pahang Bhd has a 73.91% stake in plantation, mining and development company Mentiga Corp Bhd.

For its financial year ended December 2019, Mentiga Corp raked in RM3.04 million in net profits from RM15.02 million in sales. As at end-December, the diversified Mentiga Corp had cash and bank balances of 2.18 million, and long and short-term borrowings of RM21.42 million and RM2.47 million respectively.

Mentiga Corp closed last Wednesday at 38 sen, giving the company a market value of RM26.6 million. Its net asset per share as at end-December was RM2.60.

Timber and glass outfit Golden Pharos Bhd is 72.06%-controlled by the Terengganu state via Terengganu Inc Sdn Bhd (63.61%) and Lembaga Tabung Amanah Warisan Negeri Terengganu (8.45%).

For its financial year ended December 2019, Golden Pharos suffered a net loss of RM8.62 million from RM58.22 million in revenue. In FY2018, the company bled losses of RM3.04 million from RM70.19 million in sales.

As at end-December, Golden Pharos had cash and bank balances of RM22.25 million, long-term borrowings of RM9.82 million and short-term debt commitments of RM2.53 million. It had retained earnings of RM15.75 million but negative reserves of RM20.49 million. The company had a net asset per share of 47 sen as at end-December. At its close of 16 sen last Wednesday, its market capitalisation was a mere RM22.57 million.

Terengganu’s other listed company is plantation outfit TDM Bhd, in which Terengganu Inc has 61.49% shareholding.

For its financial year ended December 2019, TDM suffered a net loss of a whopping RM215.46 million from RM431.72 million in turnover. In FY2018, TDM bled losses of RM118.66 million from RM404.58 million in sales.

As at end-December, TDM had cash and bank balances of RM89.04 million, and RM191.22 million in assets held for sale.

On the other side of the balance sheet, TDM had long-term borrowings of RM392.94 million and short-term debt commitments of RM73.35 million. Its finance costs for FY2019 were RM20.69 million. Its retained earnings as at end-December was RM401.93 million.

TDM ended trading last Wednesday at 23 sen, giving the company a market value of RM387.01 million. As at end-December, its net asset per share was 44 sen.

Perak Corp Bhd, which is 53%-controlled by Perbadanan Kemajuan Negeri Perak (PKNP), has not posted a profit since FY2016.

In FY2019, the company suffered a net loss of RM76.52 million from RM162.58 million in sales. In FY2018, the company bled net losses of RM107.06 million from RM189.95 million in sales.

As at end-December last year, the company had cash and bank balances of RM28.03 million, and short and long-term borrowings of RM443.12 million and RM61.53 million respectively.

As at end-2019, Perak Corp had accumulated losses of RM74.06 million. At its close of 13 sen last Wednesday, the company had a market capitalisation of RM13 million.

Perak Corp’s businesses — property development, ports, logistics, hospitality and tourism — have not been faring well.

Sister company and developer Majuperak Holdings Bhd is no better. Majuperak is 55.12%-controlled by PKNP and even has BI Credit & Leasing Bhd, a wholly-owned unit of Bank Pembangunan Malaysia Bhd, holding 5.27% interest in what is likely to have been a debt-to-equity swap.

After a brief spell in the black, Majuperak suffered a net loss of RM7.02 million from RM6.28 million in revenue for its financial year ended December 2019. For FY2018, the company had managed to chalk up net profits of RM3.91 million from RM26.58 million in sales.

As at end-December, Majuperak had cash and cash equivalents of RM1.54 million as well as RM9.01 million in long-term borrowings and RM3.1 million in short-term debt commitments. The company had accumulated losses of RM7.34 million as at end-December.

At its close of 35.5 sen last Wednesday, the company had a market value of about RM100 million. Majuperak’s net asset per share as at end-December was 67 sen.

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.