Tabung Haji stocks transferred at 120% above market value

By ALIFAH ZAINUDDIN / Pic By TMR

The transfer of 106 non-performing stocks from Lembaga Tabung Haji (TH) to special-purpose vehicle (SPV) Urusharta Jamaah Sdn Bhd was done at 120% above market value, according to a statement issued by the Prime Minister’s Department.

The portfolio was acquired for a total of RM16.85 billion, based on the pilgrim fund’s entry point in each respective stock, instead of their collective market value of RM7.47 billion as at Dec 31, 2018.

Its shareholding in troubled planter FGV Holdings Bhd have suffered the biggest decline in value at RM1.1 billion. With a holding of 283.7 million shares, TH would have borne a loss of 84% against its initial investment cost of RM1.3 billion.

Low crude palm oil (CPO) prices and allegations of corruption in recent years have pushed the company’s shares into penny-stock territory late last year, falling from a high of RM4.55 per share when it was first listed in 2012 to 72 sen per share as at end-2018.

Some half a billion ringgit was also wiped out from its shareholding in Malakoff Corp Bhd.

The state-backed fund transferred its entire 500 million shares in the power producer to the SPV for RM901.98 million, 55.65% higher than the company’s market value of RM400 million as at Dec 31, 2018.

Although Malakoff is a profit-making entity, its shares were trading at 80 sen per share at the end of last year — below TH’s point of entry value of RM1.80 per share.

The pilgrim fund has also taken severe blows for its shareholding in IJM Corp Bhd, which suffered a value drop of 52.42% to RM368.24 million as at end-2018.

Other heavyweights include UEM Sunrise Bhd, MMC Corp Bhd and Malaysia Marine & Heavy Engineering Holdings Bhd.

TH also transferred 29 properties to the SPV at a total inflated price of RM2.25 billion from a total book value of RM1.41 billion.

Its controversial land purchase at the Tun Razak Exchange was disposed of to the SPV at a 51% premium of RM400 million compared to the land’s book value of RM196 million.

Similarly, its property at Platinum Park was sold at RM737.4 million, 52% higher than its book value of RM485.81 million.

The Prime Minister’s Department, in a written parliamentary reply, said the situation would not have arisen if TH had not set its impairment threshold at 90%.

According to financial reporting standards, a company must declare its impairment loss if the value of purchased shares falls by more than 20% of the original cost persistently for a period of nine to 12 months.

An audit review of TH found its previous management had raised the threshold to 70% over a period of 24 months. It adjusted this twice in 2017, to 85% and then to 90%.

This was so that TH would not have to recognise the losses and its fall into a deficit, thus being able to issue dividends.

The SPV’s goal will be to rehabilitate the assets transferred from TH and restructure them.