KUALA LUMPUR (July 17): Berjaya Corp Bhd (BCorp) is selling its waste management business Berjaya Enviro Holdings Sdn Bhd (BEnviro) to Naza Corp Holdings Sdn Bhd for RM700 million cash, confirming The Edge Weekly's report.
On Monday (July 17), BCorp subsidiary Berjaya Group Bhd (BGroup) and Naza Corp signed a share sale agreement to dispose of a 100% stake in BEnviro, which is expected to be completed by February next year.
The proposed disposal is expected to see BCorp lock in RM490.74 million, which it has already allocated towards paring down its debt.
“The RM700 million price tag is based on a valuation of forward 18.4 times price-earning ratio (PE) on the back of an estimated three-year profit guarantee of RM38 million per annum and price-to-book value of 3.6 times.
“In Berjaya’s perspective, it’s quite a good valuation. It was done by our valuer, they came out with a valuation of close to RM600 million-RM700 million. It’s [on] a willing buyer willing seller [basis],” BCorp joint chief executive officer Vivienne Cheng told reporters after the signing ceremony.
According to BCorp's 2022 annual report, BEnviro posted a pre-tax profit of RM15.4 million on the back of RM47.7 million in revenue. Based on this, BCorp is selling BEnviro at a PE of more than 45 times.
BEnviro’s key assets include the Bukit Tagar Sanitary landfill located in Sg Tinggi, Hulu Selangor, which it operates and manages under a 30-year concession expiring in January 2044. The landfill manages 2,719 tonnes of municipal solid waste from Kuala Lumpur, Selayang and Hulu Selangor daily.
Cheng pointed out that the higher earnings estimate is based on increasing tipping fees at the Bukit Taggar landfill by another RM5 per tonne. It was reported in 2014 that the landfill charges the government a tipping fee of RM49 — excluding transport cost — for every tonne of municipal solid waste received.
Meanwhile, BCorp founder and non-executive chairman Tan Sri Vincent Tan said earlier the company planned to sell BEnviro at higher valuation through an initial public offering (IPO).
“But, there is an issue of a chain listing rule that prohibits the IPO of BEnviro,” he told reporters at the press conference.
A chain listing is when a subsidiary or a holding company of a corporation listed on the Main Market or the ACE Market seeks to list on its own accord.
Upon the disposal of the proposed disposal of BEnviro, Tan says BCorp will continue to explore more opportunities with BEnviro including new landfills and waste management both in Malaysia and overseas.
“We have to sell the waste management business to improve our gearing. In addition, we have a landfill in the Philippines and [are] currently working on other landfills that look forward to working with Naza. We are not exiting the waste management business,” he said.
Meanwhile, it is unclear how Naza Corp is going to finance the acquisition as it was not present at the press conference. According to sources, Naza Corp has secured financing from a local banking outfit for the asset acquisition.
However, in a separate statement, Naza Corp said the acquisition presents a unique opportunity for Naza Group to venture into the green economy, capitalising on growth opportunities in municipal solid waste, scheduled waste and waste-to-energy sectors.
“Through this proposed acquisition, Naza will leverage the extensive operational infrastructure, technological advancements, and talented workforce of BEnviro and its seven subsidiaries, targeting to retain the management and talent of these entities, for business continuity.
“This acquisition reinforces Naza's dedication towards strategic growth of its business reach — venturing into the provision of comprehensive waste management solutions and promoting environmental sustainability,” said Naza executive chairman SM Nasarudin SM Nasimuddin in the statement.
For its financial year ended December 2021, Naza Corp chalked up a profit after tax of RM145.9 million against RM460.19 million in revenue. As at end-2021, it had RM3.82 billion worth of total assets, with total liabilities of RM2 billion, and RM479.41 million in reserves.
It is worth noting that BCorp acquired the 40% stake it did not own in BEnviro from KUB Malaysia Bhd for RM80 million cash in 2020. Based on back-of-the-envelope calculations then, the deal valued BEnviro at almost RM200 million, indicating that BCorp rake in more than RM500 million from the disposals of the asset.
According to a filing with Bursa Malaysia, BCorp said it would need to obtain its shareholders approval for the disposal of BEnviro. It is noteworthy that the proposed disposal by BCorp is deemed a related party transaction, as Tan’s daughter Chryseis is married to Nasimuddin’s son SM Faliq Nasimuddin, who is the deputy group executive chairman of Naza Corp.
Trading in BCorp shares was suspended on Monday, pending an announcement of a material transaction, the conglomerate's filing with Bursa Malaysia last Friday shows.
BCorp shares closed unchanged at 30.5 sen last Friday, valuing the group at RM1.82 billion.