Berjaya’s proposed restructuring to give clearer business valuation

Many conglomerates are becoming more specific with their businesses, says CEO


Berjaya Group’s proposed restructuring, as announced by founder and substantial shareholder Tan Sri Vincent Tan (picture), is expected to provide more clarity to investors and fund managers on the value of each business within the conglomerate.

Areca Capital Sdn Bhd CEO and ED Danny Wong Teck Meng said many conglomerates are becoming more specific with their businesses.

“It attracts investors and gives clarity in buying shares. Some investors like certain businesses within the group, but do not want the exposure to other businesses that could drag the performance,” he told The Malaysian Reserve (TMR).

Wong said a conglomerate is more difficult to be evaluated and any split would help investors to choose which stocks to invest in and maximise results.

He added that a potential restructuring exercise of Berjaya into individual businesses would be along the lines of what Sime Darby Group did with its plantation and property units last year.

Tan said the proposed corporate exercise would see the privatisation of convenience chain store operator 7-Eleven Malaysia Holdings Bhd and property and hotel business arm Berjaya Land Bhd (BLand).

The 66-year-old business tycoon also plans to float mobile telecommunications service provider U Mobile Sdn Bhd on Bursa Malaysia, while the hotel business of BLand is envisioned to be listed on the Singapore Exchange next year.

Additionally, Tan said his flagship Berjaya Corp Bhd (BCorp) is working on a deal to sell its Four Seasons Hotel and Residences Kyoto in Japan for about US$700 million-US$800 million (RM3.34 billion) for a profit of US$400 million.

Tan’s locally listed companies include BCorp, 7-Eleven Malaysia, BLand, Berjaya Sports Toto Bhd, Berjaya Food Bhd, REDtone International Bhd, Berjaya Media Bhd (BMedia) and Berjaya Assets Bhd.

MIDF Amanah Investment Bank Bhd head of research Mohd Redza Abdul Rahman said a break-up basis is positive because there will be no more conglomerate discounts on BCorp’s share price.

“Each will be pegged near to its peers and maybe better, if these entities are market leaders,” Mohd Redza told TMR.

Tan said 7-Eleven Malaysia is currently undervalued compared to the 7-Eleven convenience store operator in Thailand, CP All pcl.

7-Eleven Malaysia’s share price closed one sen or 0.79% higher at RM1.28 yesterday.

The price level is, however, at a 15-month low for the convenience store chain operator.

BCorp’s share price edged 1.82% or half-a-sen more to 28 sen at yesterday’s close, giving it a market capitalisation of RM1.35 billion.

The stocks were actively traded yesterday, with 35.2 million shares changing hands at a combined value of RM9.92 million.

Tan said he intends to sell his 46% stake in 7-Eleven Malaysia to BCorp, followed by a takeover offer to buy out the company.

Tan said he would also inject one of his profitable privately owned businesses into BMedia as part of the regularisation plan for the Practice Note 17 company.

The publisher of The Sun daily said the core business of BMedia would eventually change on the back of the challenging print business today.

Meanwhile, BCorp and 7-Eleven Malaysia clarified on Bursa Malaysia yesterday that the proposed restructuring plans are the personal ideas and strategies of Tan — who is deemed as a controlling major shareholder of the group.

The boards of directors of both companies are not aware of, and have not deliberated on any of the plans or proposals, including the delistings of 7-Eleven Malaysia and BLand.

In addition, BCorp clarified that it is still in negotiations with potential buyers for the possible sale of its Four Seasons Hotel in Kyoto and has not entered into any definitive agreement.

Separately, BL and announced in an exchange filing yesterday that it narrowed its net loss to RM1.77 million in the second quarter ended Oct 31, 2018, from a net loss of RM99.9 million a year ago.

Revenue declined by 6.52% year-on-year to RM1.51 billion — mainly due to lower revenue in gaming by Sports Toto Malaysia Sdn Bhd; lower contribution from HR Owen plc; lower progress billings from the property development segment; and lower hotel and resort occupancy rates.

The company foresees the performance of both the property development, and hotels and resorts business segments to remain satisfactory for the financial year ending 2019.