This article first appeared in The Edge Malaysia Weekly on May 23, 2022 - May 29, 2022
IN recent months, investors in Country Heights Holdings Bhd (CHHB) — a property conglomerate controlled by tycoon Tan Sri Lee Kim Yew — have been on a bit of a roller-coaster ride as its share price touched multi-year highs at one point, before easing to hit limit down in less than six months.
Trading activity in CHHB shares was relatively muted at the onset of the Covid-19 pandemic in March 2020 until Oct 7 last year, when the counter saw a pickup in its share price, rising 18 sen, or 15%, to close at a two-year high of RM1.40.
That same day, CHHB had announced a massive related-party transaction which, if it panned out, would see its chairman and founder Lee injecting RM554 million worth of assets in exchange for CHHB shares.
The proposed injection was later downsized to RM507 million in December 2021, following amendments to one of the heads of agreements (HoAs) inked to exclude the acquisition of two pieces of land as the parties could not finalise the terms of the proposed transactions.
CHHB had also proposed to acquire the entire stake in Mines Wonderland Sdn Bhd for RM400 million, as opposed to just acquiring the latter’s 37.98-acre Mines Waterfront land for the same price in its initial proposal.
There have been no updates from the group since the amendments to the HoA.
Prior to the proposed major asset injection, the group had also proposed its first-ever private placement to raise an indicative RM58.81 million. The proceeds would partly finance the construction cost of the group’s Mines Wellness Suites project and College Heights Estate retail and industrial real estate development.
The funds would also be used to repay CHHB’s bank borrowings and finance the development cost of its M Smart City App.
It had initially expected to complete the fundraising exercise by the fourth quarter of 2021, but had obtained a six-month extension up to Nov 7 this year to complete the placement.
The issue price for the private placement was fixed at RM1.327 per share on Feb 9.
Last December, CHHB also announced its collaboration with Beijing Wodong Tianjun Information Technology Co Ltd, a wholly-owned subsidiary of China’s largest online retailer JD.com.
The group said it planned to invest RM250 million in capital expenditure over five years for the omni-channel business with JD.com. The announcement led to a surge in CHHB’s share price, which peaked at RM1.98 on Dec 29, 2021 — a 37% jump from its close of RM1.45 a week earlier.
Two weeks later, CHHB made headlines again with its participation in a consortium comprising SMTrack Bhd, Jiankun International Bhd, Sersol Bhd, Techna-X Bhd and MQ Technology Bhd, which will be working with 5G Infra Tech Solution Sdn Bhd (5GInfraTech) to raise funds for 5G and fibre optics-related projects by Digital Nasional Bhd.
The group did not elaborate on the details of this exercise. In a subsequent filing, following queries from Bursa Malaysia, CHHB disclosed that 5GInfraTech had yet to secure any fibre optics-related projects, but insisted that 5GInfraTech would have a “joint venture in a network-related project”.
The market’s excitement over this venture was short-lived, however, as its share price returned to the RM1.30-to-RM1.50 range in the following weeks, before interest started to pick up again towards end-February.
Around this time, a Bloomberg report quoted CHHB managing director Datuk Jared Lim Chih Li as saying that the group was planning the sale of assets worth RM300 million, comprising land plots, bungalows and commercial units at Mines Wellness City, and low-cost apartments in Selangor.
Lim, who is Lee’s son-in-law, added that the group was also eyeing opportunities in logistics, data centres and cryptocurrency mining, although he did not elaborate on these possible ventures.
Recently, CHHB’s share price took a nosedive, dropping 19 sen, or 14%, to RM1.19, from RM1.38, on May 17, and plunging further by 35.5 sen, or 39%, to 83.5 sen the following day (May 18).
This was followed by an unusual market activity (UMA) query by Bursa, alongside a spike in trading volume and its share price hitting limit down, although CHHB in its response said it was unaware of any corporate development that would have caused the sharp fall in its stock.
The recent plunge marked a 67% drop since its peak of RM2.50 on Feb 25, wiping out RM494.5 million in market capitalisation in less than three months.
Besides the recent ventures, the group has been announcing various other diversification plans over the past five years, often in areas diverging from its existing core business — ranging from blockchain to healthcare, as well as Islamic finance. This raises the question of what exactly CHHB has in its plans and whether it can deliver on these proposals.
CHHB has been announcing several blockchain-related projects since 2018 — during the height of the initial coin offering (ICO) mania — up until March 2022, starting from the group’s plan to issue its own cryptocurrency called “Horse Currency”.
About two years later in September 2020, Lee announced that the Horse Currency project was to be undertaken through his private ventures and that he would step down as CHHB chairman effective from Jan 1, 2021, to pursue his interest in the blockchain space.
He is still executive chairman on CHHB’s board, however, and there have been no further updates on the ICO plan. Lee had also, via his private vehicle, launched a cryptocurrency wallet dubbed “Unicorn Wallet”’, although there have been no updates on this project either.
Since then, there have been vague mentions of blockchain and cryptocurrency by CHHB, such as in its latest annual report, in which Lee stated that the group would “embrace blockchain technology” and that it was looking into transforming some of its properties into crypto mining hubs.
Again, no updates on these ventures were ever given by the company.
In June 2018, the group announced plans for several billion-ringgit projects to turn around its fortunes, including a proposed automotive expo centre dubbed Mines Car City Centre (with a gross development value of RM1.5 billion), a wellness hub (RM1.2 billion in GDV), as well as the Cheng Ho Islamic Finance and Trade Centre (RM1 billion in GDV).
Part of the plan was to raise a RM1 billion “war chest” through direct borrowings, bond issuance or strategic partnerships to fund the ventures, Lee had previously said.
The Car City Centre was supposed to rejuvenate the Mines International Exhibition and Convention Centre into Asean’s largest automotive expo centre, while the Cheng Ho Islamic Finance and Trade Centre would comprise an exhibition centre, a business hotel, retail outlets, business suites and warehouses in Alor Gajah, Melaka.
The Grand Wellness Hub, on the other hand, would comprise a wellness centre, shopping mall and serviced apartments in Mines Wellness City, as well as a proposed joint venture to develop Luxe Retirement Residences service apartments.
While these new business segments were added to its quarterly results in the third quarter ended Sept 30, 2018 (3QFY2018), they were subsequently removed from its financial statements from 1QFY2021, and not much has been said of the ventures since then.
CHHB returned to the black with a net profit of RM2.64 million in the financial year ended Dec 31, 2021 (FY2021), compared with a net loss of RM36.1 million in FY2020 and RM34.6 million in FY2019.
At end-December last year, CHHB’s net gearing ratio stood at 0.24 times, while its shareholders’ funds amounted to RM785.165 million.
It remains to be seen how CHHB, with a market capitalisation of RM250 million, will fund these diversification and digitalisation plans. More importantly, only time will tell whether these plans will contribute positively to the group’s bottom line.
Before that happens, sceptics and doubters will be wondering whether CHHB is losing its focus as having an over-diversified business portfolio might cause distractions.
Investors who bought CHHB shares at the peak of RM2.50 on Feb 25 are still waiting to see the light at the end of the tunnel.
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