Industry players are naturally forced to go beyond the Malaysian shores as they seek their next growth spurt
Just these three players alone have forked out close to RM6 billion in their acquisition trails. That’s enough to pay for the development allocation for Sarawak under the proposed federal government’s Budget 2023.
Why are these corporations moving at such speed to Australia? Is something wrong here in Malaysia? Or is Australia sizzling with opportunities they simply cannot close their eyes to?
Last week, Sime Darby announced its plans to acquire Onsite Rental Group Ltd for RM1.92 billion (A$635 million) as it deepens its presence in Australia, and attempts to penetrate the Aussie heavy equipment and industrial solutions business. Onsite is one of the largest business-to-business (B2B) equipment rental service providers in Australia, servicing primarily the mining and construction industries.
The week before, Gamuda announced plans to acquire Downer’s Australian transport projects business, DTP, carrying an estimated enterprise value (EV) of A$212 million (RM636 million). DTP is a distinct business unit under Downer, providing civil construction services in delivering transport projects for its customers, with specialist rail capability.
In January, Gentari, the clean energy arm of Malaysia’s state oil firm, scooped up Australian renewables firm Wirsol Energy. Petronas did not say how much it paid for the company which has solar and battery energy storage systems, but sources quoted in the media put its enterprise value at A$1 billion.
We could have added UMW Holdings Bhd to the list. Sources told us that the corporation was on an acquisition trail in Australia to beef up its equipment division, which markets, sells and services
heav y, industrial and marine equipment from internationally renowned manufacturers. But the deal, apparently, fell through on pricing.
Australia definitely has a special pull for Malaysians. A fortnight ago, I attended the Australia Day celebration in Kuala Lumpur. It attracted a huge crowd, including a few ministers and corporate leaders.
Also present was former Prime Minister (PM) Tun Dr Mahathir Mohamad. In 1993, then Aussie PM Paul Keating called him “recalcitrant”, causing an outbreak of a major political row between the two countries. But it’s all water under the bridge now. Dr Mahathir and his wife Tun Dr Siti Hasmah Mohd Ali seemed very comfortable mingling among the guests, with people coming forward to snap photographs with them.
So, people to people, both nations are getting along just fine. At the Aussie end, their statistics tell us that they are serious about getting foreign direct investment (FDI). In fact, one report suggested that overseas investment is playing an ever-larger role in Australia’s economic story.
In 2000, total foreign investment in Australia as a percentage of GDP stood at 120%. In 2020, the measure – which includes stocks and shares – was 203%, according to official figures.
This would not happen if they don’t have a well-oiled machinery to capture outside money.
On the part of these large Malaysian corporations, some of them are already hitting the ceiling locally as they chart their next growth leap. As a market, Malaysia is fiercely competitive, compressing their margins. So, in their search for better profitability, these players are forced to look further away for opportunities.
For many, the US and Europe may be a little too distant and pricey. There are always exceptions, of course. In May 2022, Petronas Chemicals Group Bhd paid €1.54 billion (RM7.02 billion) to acquire Swedish specialty chemicals company Perstorp Holding AB.
Africa and South America are still unknown to many. So, they are not continents that many players are willing to venture.
This makes our local corporations look hard at Asia. Australia fits the bill. It’s a large country with a vibrant economy, providing opportunities.
“It’s a coincidence, no big picture,” said one corporate leader when I asked him why the spate of corporations is making a beeline to Australia. “They’re looking to make good margins.”
Perhaps, so. These larger corporations are naturally forced to go beyond the Malaysian shores as they seek their next growth spurt.
But at the same time, lurking around the corner are the warning signs that Malaysia is perhaps not expanding fast enough, and in the right areas, to make it worth the while for these companies to continue investing locally. The corner must be identified. That’s the job for the various ministers and the people under their beck and call.
Until the next deal, go grab a feed.
- Habhajan Singh is the corporate editor at The Malaysian Reserve.
- This article first appeared in The Malaysian Reserve weekly print edition