Now could be the right time to privatise BLand, analyst says

by NUR HANANI AZMAN / graphic by MZUKRI MOHAMAD

NOW might be an opportune time for Berjaya Corp Bhd (BCorp) to privatise its subsidiary, Berjaya Land Bhd (BLand), on the premise that no economic issues at present could pose challenges to the plan.

An analyst with a local brokerage said BLand is also facing the deadline to meet the 25% public shareholding spread requirement, hence taking the company private is an option to leave the rule.

“BLand reported the need to fulfil the free float level by December. It is better for BLand to be privatised soon if BCorp wants to untangle its corporate structure,” the analyst told The Malaysian Reserve.

In a virtual talk last week, BCorp group CEO Abdul Jalil Abdul Rasheed said he has ideas to privatise BLand and sell Berjaya Sports Toto Bhd (BToto) under the group’s strategic transformation plan.

He said the strategic plan also included a proposed hospitality real estate investment trust.

However, BCorp clarified in a bourse filing last Friday that such plans are the new CEO’s personal ideas and strategies.

“En Jalil (sic) was mandated to relook at BCorp structure and among others to improve synergies and efficiency, streamline the various group businesses and to transform BCorp into a high performing organisation,” the group noted in an exchange filing last Friday.

It said the CEO was answering possible permutations about how he can structure the group to achieve the objectives of the restructuring exercise and the possibility of divesting certain assets during the public investor relations forums.

The group further said the board is not aware of and has not deliberated any of the abovementioned strategic plans.

“The directors of BCorp will deliberate on the finalised proposals to be tabled to them for board’s consideration and decision,” it added.

In a webinar last Thursday, Abdul Jalil said BLand owns a lot of companies and the best way to rationalise the company is through privatisation.

For BToto, he said there is no specific timeline to sell it, only when the price is right.

“I’m not too much in a rush of selling BToto because it gives good dividends,” he said.

The analyst said BToto deals with too many restrictions as a number forecast operator (NFO) in a highly regulated sector, diminishing the interest among investors.

“High-net-worth investors with interest in betting business might view BToto as still a stable cashflow generator. It is not a pressing issue (to sell BToto),” the analyst added.

Gaming stocks have been seesawing since last year on the backs of movement control restrictions to combat the Covid-19 pandemic.

Kenanga Investment Bank Bhd analyst Teh Kian Yeong said in a report that 2021 would be another tough year for the gaming companies due to prolonged Movement Control Order (MCO).

“But we believe the impact would be less severe than 2020, given their cost-rationalisation exercises.

“With the start of Phase 3 of the National Covid-19 Immunisation Programme and targeted full nationwide herd immunity by year-end, business volumes should rebound swiftly on pent-up demand post-pandemic, coupled with the reopening of borders,” Teh wrote recently.

The investment bank maintained an ‘Overweight’ rating for the gaming sector.

Teh noted that the first half of 2021 (1H21) had been another bad patch for NFOs such as BToto and Magnum Bhd, given the extended movement restrictions that caused their outlets to close.

“Overall, we believe 1H21 will be better than 1H20 as the former had only 14 to 15 draws cancelled, while during MCO 1.0 last year, there were a total of 40 draw cancellations.

Teh said extended movement restrictions would continue to weigh on the earnings of NFOs until the rules are lifted.

Even with earnings cuts, he said NFOs still offer attractive dividend yields of 3% to 5% for this financial year.