This article first appeared in The Edge Malaysia Weekly on December 18, 2023 - December 24, 2023

THE restructuring of Lembaga Tabung Angkatan Tentera (LTAT) has been put on hold following a change at the helm of the Ministry of Defence (Mindef).

Sources say those involved in the restructuring have been told not to proceed with any work on it pending a review by the new minister.

“All meetings with bankers and auditors on the planned corporate exercise involving assets of Boustead Holdings Bhd have been postponed until further notice from the new minister of defence,” says a source.

Last week, Datuk Seri Khaled Nordin was appointed as the new defence minister, replacing Datuk Mohamad Hasan, or Tok Mat as he was better known, who was moved to the Ministry of Foreign Affairs. Mohamad Hasan’s tenure with Mindef will be known as the period when there was the political will to restructure LTAT.

The plan to reorganise LTAT started towards the end of 2021. It was a multi-strategic initiative with the objective to change the asset allocation portfolio of the fund, which manages some RM10 billion. At the time, LTAT’s assets were illiquid as almost 50% of them were tied to Boustead and another substantial portion to Affin Bank.

The plan is for LTAT to have a balanced portfolio where it diversifies away from its focus on Boustead, monetises some of the assets and is in a position to pay out higher dividends on a sustainable basis by 2025.

“With a higher degree of liquidity, LTAT would be more nimble in its asset allocation and improve its returns. By 2025, LTAT’s assets under management should have grown 50% to RM16 billion and its return on investment to more than 5%. This should translate into a dividend of more than seven sen to be paid out on a sustainable basis,” says a source.

Sources also say the plan was agreed upon by the LTAT board and had gone through the cabinet for approval before it took off. All the key people in the group and its subsidiaries were roped in to put together the plan so that it could be executed.

“This latest development has caused concerns that LTAT’s restructuring will go back to the drawing board,” says a source.

The initial step to restructure LTAT was to unlock Boustead’s value and take the problem-riddled littoral combat ship (LCS) project off its books. A team, under LTAT’s Datuk Ahmad Nazim Abdul Rahman, took charge of the execution.

“The plan was endorsed when Datuk Mohamad Hasan took over as the minister of defence at the end of last year. Having come from the corporate world, Mohamad was quick to grasp the plan and worked well with LTAT’s management and top officials at Mindef,” says a source.

The privatisation of Boustead was announced in March this year and completed three months later. At the same time, negotiations were ongoing with the Ministry of Finance on the LCS project. In May this year, the government announced that the MoF would take over the LCS project.

LTAT’s restructuring was scheduled to go into intense execution mode in 2024.

Sources say one of the plans was for LTAT to reduce its stake in Affin Bank. In April this year, the pension fund disposed of a 4.85% stake in the banking group to the Sarawak government for RM221 million or RM1.97 per share.

After the divestment, LTAT still controls 49% of Affin Bank, which is valued at about RM2.4 billion based on market price. It has been reported that the Sarawak government was looking to increase its equity in Affin Bank to up to 30%, if approved by Bank Negara Malaysia.

LTAT is also in the final stages of completing the restructuring of its 54%-owned Pharmaniaga Bhd, which has a concession to supply drugs, medical equipment and provide support services to the Ministry of Health.

Pharmaniaga has attracted several suitors that have proposed to acquire the company from LTAT at low valuations. One of the proposals was from a former Umno politician working closely with a major property developer. The proposal had reached Putrajaya.

In April this year, Tok Mat had told the media that there was a proposal to take over Pharmaniaga “cheap”. He had said that any cheap sale of Pharmaniaga would only happen “over his dead body”.

Now that Tok Mat is out of Mindef and LTAT’s restructuring is under review, the question is, will there be changes to the plans to enhance the fund?

See also “Mindef’s revolving door once again raises concerns about LTAT’s restructuring” on Page 55. 

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