Saturday, 9 March 2013

Protasco, MISC, HL Cap, Bintulu Port


I wrote before about Protasco's latest quarterly report, leaving out all relevant information regarding their huge (and puzzling) acquisition of an oil & gas company in Indonesia. Protasco has amended its quarterly report three times (possibly urged by the authorities?), and in it's fourth attempt it finally got it right.

Instead of

"21. Corporate Proposals
There were no corporate proposals announced but not completed during the current quarter."

The new text is:

"21. Corporate Proposals
Save for the following and the Proposed Private Placement mentioned in Note 9, there was no other corporate proposal announced but not completed in the current quarter up to 14 February 2013, being the last practicable date from the date of the issue of this report: -

Proposed Acquisition.

On 28 December 2012, AmInvestment Bank Berhad (“AmInvestment Bank”) on behalf of the Board of Directors of Protasco Berhad (“PB”) has announced that PB had on 28 December 2012 entered into a conditional sale and purchase agreement with PT Anglo Slavic Utama to acquire 95,000,000 ordinary shares of IDR1,000 each in PT Anglo Slavic Indonesia (“PT ASI”), representing 76% equity interest in PT ASI for a proposed purchase consideration of USD55,000,000."

Not one iota extra information, but that was to be expected: Protasco has not been transparent at all, and apparently prefers to pursue this chosen path.

How one can "forget" to report about its private placement, and even more important, its RM 170 million acquisition is a mystery to me.

MSWG gives out prices for the companies with the best Corporate Governance, I would like to suggest to also give out prices for companies displaying the worst Corporate Governance. I would like to propose Protasco as a possible candidate in the last category.


MISC has released the report by the independent advisor AMInvestment Bank.

Its conclusion is: "not fair but reasonable".

Its fair valuation is in the range of RM 5.69 to RM 6.10, therefore the offer price of RM 5.30 is not fair.

Why reasonable? Because Petronas "threatens" with delisting and compulsory acquisition, and at least this is an opportunity for shareholders to exit.

Luckily the independent advice does give the long term graph of MISC, clearly showing that the price offered is at a huge discount to the prices in the previous years (only at a premium compared to the price in the last year).

I have big problems with this deal. Petronas is owned by (the people of) Malaysia, why can't it offer a fair price to the MISC shareholders?

Not too long time ago shareholders subscribed to rights issue priced at RM 7 per share, all those shareholders are sitting on substantial losses.

Also, I still haven't heard any good reason why Petronas wants to privatize MISC. As the majority shareholder, what can they do after the privatisation which they can't do in the current situation?

Hong Leong Capital:

Bursa Malaysia has issued an UMA (Unusual Market Activity) to Hong Leong Capital, the company announced that it

"is not aware of any of the following that may have contributed to the unusual market activity:-

1.       any corporate development relating to HLCB Group’s business and affairs that has not been previously announced that may account for the unusual market activity including those in the stage of negotiation/discussion;

2.       any rumour or report concerning HLCB Group’s business and affairs that may account for the unusual market activity; and

3.       any other possible explanation to account for the unusual market activity."

UMA's have more bite in them since the Can One case, so good Bursa Malaysia issued it. I hope they are on top of the developments, it is a very puzzling and intriguing case.

Bintulu Port:

Bintulu Port announced that it is seeking permission for a Private Placement (PP) of a massive 60 million shares (15% of its issued and paid-up capital) at a 5% discount to its major shareholder. MSWG is questioning why the company is not resorting to a rights issue, giving all shareholders the opportunity to participate.

I don't like Private Placements at all, if they ever occur they should be small (say up to 5% of the issued shares) and at a very low or no discount. Under the current rules, the potential of abuse is simply too large, the authorities should look into this issue. But good that MSWG questioned the PP of Bintulu Port.


  1. "As the majority shareholder, what can they do after the privatisation which they can't do in the current situation?"

    Exactly friend. I have been asking the same question too. Unfortunately, all other minority shareholders of MISC are government agencies. They are most likely to accept the RM5.30 offer due to 'instructions from the top'. Petronas CEO even speculated that MISC share price 'may drop to RM2.00'.

    Shipping industry is cyclical and long term investors understand this and willing to ride the roller coaster ride. Now MISC is gradually recovering from losses and Petronas is robbing the shareholders the opportunity to enjoy the benefits of dividends and capital appreciation.

  2. Here we have another case of privatization attempted below fair value of the company.

    It seems that the majority shareholders in Malaysia are having a field day buying undervalued assets these days. But 'kudos' to the controlling shareholder for revising its offer. I am still pretty puzzled why didnt they use the infamous compulsory delisting exercise to wipe out the remaining shareholders. There are so many pitfalls investing in undervalued equities here. One thing for sure, we do not have a Carl Icahn to save the day.

  3. Hi, Agree with you, we need more activists, especially the ones who put their money where their mouth is.

    MBf could delist, but not mandatory acquire, for that they need 90% of the shares they didnt hold. Example, majority shareholder owns 80%, then he needs 98% (= 80% + 90% of 20%) acceptance of the shares to mandatory acquire.