Gap would be bigger than 2017’s RM4.1b without asset transfer

Total unrealised loss for the 106 securities disposed of by TH would have crossed into double figure

By ALIFAH ZAINUDDIN / Pic By MUHD AMIN NAHARUL

Lembaga Tabung Haji (TH) has transferred billions worth of securities in one of the country’s largest cash-for-asset deals in recent time, allowing the pilgrim fund to balance its battered financials and leave enough room for a dividend distribution.

The state-owned fund, with about RM72 billion deposits, warned that it is still not out of the woods and the over nine million depositors should not expect a hefty “hibah”, a reference to a gift based on Islamic dividend- sharing principles.

In what is reminiscent of the fallout following the East Asia financial crisis of 1997/98, the government created a special-purpose vehicle (SPV), Urusharta Jamaah Sdn Bhd, which paid RM19.9 billion for TH’s securities and other assets. The SPV issued Islamic notes to finance the purchase.

The move to shift the underperforming assets was mooted by the government after financial audits showed a RM4.1 billion gaping hole between the fund’s liabilities against its assets at the end of 2017.

Securities of 106 underperforming stocks previously owned by TH have been moved to the SPV, with the unrealised loss of the top 10 counters totalling RM4.6 billion. The highest unrealised loss was 96.5%.

The total unrealised loss for the 106 securities disposed of by TH would have crossed into double figure, taking into account the fund’s total equities value was about US$4.5 billion (RM18.42 billion) in the first quarter of last year, based on Bloom- berg’s historical data.

The latest check showed TH’s total equity shareholding value is now valued at around US$2.5 billion in 53 listed companies.

Other assets included in the SPV transfer were 29 properties and one unlisted plantation company.

TH also confirmed that the controversial land purchased at the Tun Razak Exchange has also been disposed to the SPV at a price that is higher than the RM188.5 million the fund paid for the 1.6-acre (0.65ha) plot.

TH CEO Datuk Zukri Samat (picture) said the sale of the securities assets was critical to balance the fund’s book and plug the financial gap, which would have prevented TH from distributing any “hibah”.

“We have this position where we need to sell and profit in order for us to close that hole — that big gap,” Zukri said, referring to the RM4.1 billion gap recorded in its 2017 account.

Zukri, who was appointed to steer the fund which is mainly responsible for assisting Muslims to perform the Haj, said the “gap would be bigger” if it takes into account the unrealised loss from the underperforming securities for the year ended Dec 31, 2018.

“The deficit in 2017 was RM4.1 billion and in 2018, let me tell you, the deficit is much higher. If nothing is done, we cannot pay ‘hibah’ (dividends) for many, many years to come,” Zukri said at a special briefing in Kuala Lumpur yesterday.

TH has been under fire for disposing of the securities to the SPV, including “blue chip” counters.

He gave the example of FGV Holdings Bhd, which the fund acquired more than six years ago at RM4.36 in 2014 and is now trading around 82 sen.

“We can’t wait for the share price to rise…we do not have the time,” he said, adding that the SPV had purchased the equities at an average premium of 55%.

The former Bank Islam CEO, however, did not reveal the total unrealised loss of all the 106 stocks sold to the SPV.

“Expect the shortfall to be very much bigger in 2018 than the RM4.1 billion in 2017,” he said, if the unrealised loss from the securities was taken into account.

Zukri said depositors can now expect a hibah payout for 2018, but depositors should not to expect much as the fund had just “recovered from a fever”.

The fund is also expected to review its asset allocation with 60% to 70% to be derived from fixed income.

“We will have to look at our asset allocation. We are not fund managers. Our role is to administer the haj, so the focus of the investment should change,” Zukri said.

TH’s exposure in equities rose as high as 55%, exposing the fund to market volatility and damaging its financials.

In an effort to enhance transparency, Zukri said TH will be providing quarterly updates on its financial performance, beginning in the first quarter of this year.

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