This article first appeared in The Edge Malaysia Weekly on August 28, 2023 - September 3, 2023

When a company has excess cash, the right thing to do is to distribute the money to shareholders. One just needs to see how much value Eco World International Bhd is creating by distributing excess cash to shareholders in the form of bumper dividends.

Muar Ban Lee Group Bhd (MBL), which essentially provides engineering services to the plantation sector, could do the same instead of acquiring minority stakes in other listed companies.

In an announcement last week, MBL emerged as the single largest shareholder in SWS Capital Bhd with a total interest of 12.5%. It appears to have acquired the block of shares from businessman Datuk Eddie Ong Choo Meng, who ceased to be the substantial shareholder in the furniture maker.

MBL’s entry price is not known but SWS Capital was hovering at about 38 sen when the transactions were done. Sitting on cash of about RM103 million with minimal debts, MBL can well afford the purchase.

However, it is highly unlikely that minority shareholders of MBL would want to have small stakes in other listed companies. For one, how can MBL extract value from SWS Capital? Does it want to remain the single largest shareholder but without any meaningful control over the company?

With a 12.5% stake, MBL can only get dividends, if and when SWS Capital declares any. Apart from the dividends, MBL can opt to dispose of the shares and possibly make a profit, provided the price is higher than its cost.

But investments in other listed companies are not MBL’s core business. If it has no better use for the money, MBL should return it to shareholders.

Nevertheless, this is not MBL’s first foray into putting its money in other listed companies. It had previously taken a stake in Cycle & Carriage Bintang Bhd (CCB) and Symphony Life Bhd. CCB has since been de-listed, while Symphony Life is a laggard among property stocks.

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