DRB-Hicom in favour while Malakoff shunned on news of Alam Flora deal

DRB-Hicom plans to dispose of its entire interest in Alam Flora to Malakoff for RM944.6m


It was a day of contrasting fortunes for DRB-Hicom Bhd and Malakoff Corp Bhd after the former announced a RM945 million corporate exercise, while Malaysia Marine and Heavy Engineering Holdings Bhd (MMHE) and Utusan Melayu (M) Bhd turned in with mixed market performances.

DRB-Hicom announced on Tuesday that it plans to dispose of its entire interest in waste management company Alam Flora Sdn Bhd to Malakoff for RM944.61 million via its wholly owned unit, Hicom Holdings Bhd.

The conglomerate said the proceeds of RM500 million from the disposal will be used to pare down its debt, while the remainder will be reserved for its existing businesses, including funding Proton Holdings Bhd’s turnaround exercise, if needed.

DRB-Hicom holds a 50.1% stake in Proton, which is the holding company of Perusahaan Otomobil Nasional Sdn Bhd. Chinese automaker Zhejiang Geely Holding Group Co Ltd holds the remaining interest.

The market reacted positively to the news as DRB-Hicom shares rose eight sen to close at RM2.32 yesterday with a market capitalisation gain of RM154.4 million. A total of 23.29 million shares were traded for the day.

However, investors were less optimistic on the impact of the deal on Malakoff, resulting in the company losing RM418.2 million in market capitalisation after its shares closed 8.5 sen, or 8.17%, lower at 95.5 sen yesterday.

The power generation company is expected to acquire the 74 million shares, or 97.37% interest in Alam Flora via its wholly owned subsidiary, Tunas Pancar Sdn Bhd, as part of its diversification into waste management.

Alam Flora holds a concession agreement to provide solid-waste collection and public cleansing management services to several concession areas in Pahang, Kuala Lumpur and Putrajaya until Aug 31, 2033.

Malakoff said it will finance the proposed acquisition via a combination of internally generated funds and bank borrowings, while DRB-Hicom said the disposal represents an opportunity to monetise its investment in Alam Flora.

DRB-Hicom has invested RM93.74 million in the waste management company since 1996.

Both Malakoff and DRB-Hicom are linked to businessman Tan Sri Syed Mokthar Al-Bukhary.

Syed Mokthar is an indirect major shareholder of DRB-Hicom via his 90% stake in Etika Strategi Sdn Bhd, which in turn holds a 55.92% stake in DRB-Hicom.

He is also an indirect major shareholder in MMC Corp Bhd, the largest stakeholder of Malakoff.

Meanwhile, MMHE saw its counter declining 9.43% following a poor second quarter showing ended June 30, 2018 (2Q18).

The company closed 7.5 sen lower at 72 sen yesterday as 3.94 million shares exchanged hands, erasing some RM120 million in market capitalisation in a day.

In 2Q18, the offshore oil and gas service provider’s net loss widened to RM49.48 million against the RM13.7 million loss noted in 2Q17 on lower turnover from its heavy engineering and marine divisions.

The company said industry activities for the remainder of the year are expected to be subdued before picking up in 2019 as the higher oil price environment has yet to trickle down into the service side of the industry.

Media company Utusan Melayu also observed a 14.3% drop in share price just before midday trading yesterday.

This came after the company defaulted on a RM2.96 million principal payment owed to Affin Islamic Bank Bhd.

Utusan Melayu shares then recovered late in the day to close 1.5 sen higher at 26 sen with 82,900 shares traded.

The Malay-language news and media outlet said it intends to submit a proposal to restructure the term loan facilities with Affin Islamic Bank, while working towards restructuring all its current loan facilities.

It added that it believes it can make a solvency declaration as the company’s current assets and properties have a market value exceeding the outstanding sum owed to Affin Islamic Bank.

The company’s assets and properties are charged as securities for the term loan facilities granted by the bank.