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Thursday, June 07, 2007

Nobody controlled IJM Corporation Bhd

IJM Corporation Bhd at one point of time one of the big three constrution company to watch. together with Gamuda and Road Builders Holdings Bhd. In fact, the largest market capitalise construction company on Bursa Malaysia is YTL Corporation Bhd.

Recently, Road Builders Holdings Bhd was acquired by IJM Corporation Bhd. This make IJM Corporation Bhd has an upper hand over Gamuda. Thus, the top two construction company might be YTL Corporation Bhd and IJM Corporation Bhd and Gamuda, one of the top three excluding governement link companies (GLC).

If IJM gain control of Kumpulan Europlus Bhd . IJM group control two public listed contruction company and two property development company. IJM,Kumpulan Europlus Bhd, RB Land Bhd and indirect associated company Talam. It become a giant company that you unable to ignore.

However, it seem nobody control IJM!

Who control IJM

IJM initially was part of the IGB Group. However, in order to raise capital for it Mid-Valley Megamall Project. IGB disposed off it stake in IJM to Zelan Holdings which ultimately control by Tan Sri Syed Mokhtar al-Bukhary.

However, Zelan Holdings’s shareholding in IJM shrank after IJM made a general offer to acquire Road Builder (M) Holdings Bhd last year via a share swap. This resulted in Zelan being unable to book in its share of IJM’s profits although it could still receive the dividends paid out by the latter.

Zelan is sitting on a cash pile of about RM280mil after disposing of part of its stake in construction-based IJM Corp Bhd. Its net cash per share rose to 99.7 sen after the share sale from 66.3 sen previously.

Zelan Chief executive officer Albert Chang confirmed that Zelan would continue to trim its interest in IJM, which currently stood at 9.67%.

This mean Tan Sri Syed Mokhtar al-Bukhary and Zelan has lost control over IJM.

Thus, IJM, such a large group of company, become a company that run by professional manager, it managing director Datuk Krishnan Tan with no controlling shareholder.

Control by Accountant, not Engineer

Other than previously bumiputra control contruction company like Renong's Halim Saad, who is Accountant by training. Contruction company control by chinese usually control by engineer.

Road Builder's Tan Sri Chua Hock Chin,Gamuda's Y Bhg Dato' Lin Yun Ling, YTL's Tan Sri Francis Yeoh, even smaller Mudajaya group was headed by engineer.

IJM, however, was one of the rare contruction company that lead by an accountant.

Managing Director Datuk Krishnan Tan qualified as a Certified Public Accountant in 1978 after graduating with a Bachelor of Economics (Honours) degree from University of Malaya in 1975, and holds a Master’s degree in Business Administration from Golden Gate University, San Francisco, USA. Prior to joining IJM, he was with Kumpulan Perangsang Selangor Berhad for seven (7) years, his last position was Group Financial Controller of the Group.

He joined IJM as Financial Controller in 1983 and joined the Board as Alternate Director on 12 June 1984, Director on 10 April 1990 and Deputy Managing Director on 1 November 1993. He assumed the post of Group Managing Director on 1 January 1997. He was redesignated Chief Executive Officer & Managing Director on 26 February 2004.

It is not easy for an accountant to grow a contruction company to such a size. So far, it seem no problem leading staff that was previously lead by engineer like staff he acquired from Road Builder Holdings (M) Bhd.

Potential takeover target

With no controlling shareholder in the company. IJM become a likely take over target. However, being one of the largest market capitalisation contruction group in the market. It is difficult for just anybody to swallow the group.

After spending so much for a company, the new controlling shareholder must be able to work with the current team or he must have the ability to manage such a large group if he intended to change the team.

If nobody acquired the company eventually. IJM might be the first company in Malaysia like company in US,that the company was invested by institutional shareholder and manage by professional manager with no controlling shareholder. In such instances, IJM must have a strong team of independent director on the board and must have good succession planning for managing director.


Tuesday, June 05, 2007

Company's performance and it management

Investment in shares, other than read it financial report. One way to select a company is to select it management. When you invest in shares in a company. You become a shareholder, or a partner of your company. Don't you want to know your partner well before you invest in a company?

This is what a lot of speculator or investor in Malaysia did. In fact, it is a dangerous move if you invest in a company without knowing your partner well.

I have a post Would you buy Toyota Camry, Honda Accord or Proton Chancellor? which I have stated: I feel investment in company equivalent to investment in a company CEO. If government let Idris Jala to head Proton rather then MAS. I might be consider as he has the track record of turnaround a company.

On May 29, 2007, Malaysia Airlines (MAS) reported a sustained turnaround with a net profit of RM133.1mil for its first quarter ended March 31, compared with a loss of RM319.9mil in the year-earlier quarter.

While on June 1, 2007, Proton posts RM591mil loss. The outcome was exactly the same as my prediction nearly one year ago on July 21, 2006.

MayBank and Ambank's management has recently implement a policy that not base on merit but base on racist selection of it panel lawyer until directed by cabinet to stop it .

But non of the management responsible for implementing such policy has been removed.

While Ambank was not appear not Reader's Digest Most Trusted Brand. Maybank appear on the list together with Public Bank. I would certainly choose Public Bank over Maybank if I want to invest in banking stock.


TPP not related to Tan Sri Syed Mokhtar Al-Bukhary

My previous post Oil refinery and Electrical home appliance stated that the US$7bil Trans-Peninsula pipeline (Transpen) was awarded to Tan Sri Syed Mokhtar Al-Bukhary's SKS Development Sdn Bhd. This was followed by a special exclusive report by Nanyang one week after my post stating a similar claim.

However, last weeks, two ex-engineer with Petronas,Rahim Kamil Sulaiman (left) and Syed Izhar Al-Idrus (Right) claim the idea of the US$7bil pipeline was theirs but along the way the Government had also received two other proposals to build a similar pipeline connecting the west to east of Peninsular Malaysia.

One was from UEM World Bhd and the other the widely publicised SKS Development Sdn Bhd (a private company linked to Tan Sri Syed Mokhtar Al-Bukhary) that has an arrangement with the Iranian National Oil Co.

Rahim dismissed speculation that SKS and TPP were working together on the project.
“We have no relation with SKS by equity or contract in any form. If anyone claims this, we would be very keen to see the evidence.” reported The Star.

Rahim Kamil Sulaiman 53 and Syed Izhar Al-Idrus hold 50:50 equity interest in Trans-Peninsula Petroleum Sdn Bhd (TPP), the promoter and developer of the project, while former Kedah Mentri Besar Tan Sri Osman Aroff is a director in the company.

TPP has cleverly roped in big names such as Ranhill Bhd to carry out the construction and engineering, Saudi Arabia’s Al-Banader International Group to supply the oil and Middle Eastern investors to take up stakes in TPP, Indonesia’s Bakrie & Brothers tbk for pipe supply and PT Tripatra as its project manager.

Non of Malaysian pipe manufacturing company benefit from that project, including Wa Seong.

Ranhill shares price has rise before the announcement. As both promoter was not running a conglomerate company like Syed Mokhtar. It is difficult to demand them to invest their profit into other project like electical home appliance as they do not have the resources and skill to do it.

Update: SKS Development Sdn Bhd (a private company linked to Tan Sri Syed Mokhtar Al-Bukhary) still get the refinery portion of the project but not the pipeline


Friday, June 01, 2007

Stock market and Reader's Digest most trusted brand

Leading stock market legend Warret Buffertt, who becomes the world second richest people after Microsoft's Bill Gates via investment in shares market, invest in brand name or what he call "Consumer Monopoly" like Coca Cola, McDonald, Wall Mart etc.

Usually, I feel company list on Reader's Digest Trusted Brand Award are company with good quality product. York air conditional, market by Malaysian leading company OYL Industries Bhd, perceived to be a blue chip stock after Genting before the company divested by Hong Leong group. share price go up to RM50 at one point of time before Asia financial crisis. The same shares price trend was seen on another regular recipient of Trsted Brand Award, Panasonic.

Non listed MNC product, like biscuit product categories recipient....Jacob's by Danone, also has good quality. I wouldn't invest in local biscuit company like Hwa Tai, Hup Seng etc unless they able to produce the same quality product like Jacob's.

Base on the above, there seem to be a relation between share price performance and recipient Reader's Digest Trusted Brand Award.

However, some value become too high, like Nestle at PE ratio of 21.3. Spritzr.... PE ratio at 17.4. Shares price already appear expensive.But, they is some gem yet to be discover.

One of it is Poh Kong under Jewellery categogy. It PE ratio was only 5.3. That means you can recoup you investment within 5.3 years if the company able to maintain it current profit, which is likely if it was listed on Trusted Brand Award. Your invetsment will be double without any grow. However, usually a strong brand company, or what Warren Buffett term as company that enjoy Consumer Monopoly, usually able to grow their profit. If a company able to grow their profit at 20% per year. Profit will be double within 5 years.

Another company I like is Amway, it is the most Trusted Brand under water purifier category and Vitamin/Health supplement category. It attraction is it dividend yield at 8.8%. It is more than double, almost triple than fixed deposit rate at around 3%. Thus, can bet on it if your aim is dividend.

The other recipient on of Vitamin/Health Supplement category...Appeton. The brand was under Mesdaq listed Kotra. However, it PE ratio at 9, more expensive than Poh Kong and did not pay dividend as much as Amway. Dividend yield less than bank's fixed deposit rate.

Thus, my bet is on Poh Kong and Amway on share aprreciation and dividend respectively.