Masterskill: another deal aborted

I have written many times about Masterskill, I am afraid not often in a positive way.

The company recently aborted its proposed sale of its properties. Below information is from MSWG's newsletter, December 18, 2014:


According to the announcement released by MEGB on 16 December 2014, the independent valuer namely Cheston International (KL) Sdn Bhd, had ascribed an indicative market value of RM110.4 million for Masterskill (M) Sdn Bhd’s operating property assets in Cheras, Kota Kinabalu, Kuching and Pasir Gudang (“Properties 1”), which is significantly higher than the initial indicative sale consideration of RM75 million offered by Mr. Siva Kumar A/L M. Jeyapalan.

Following the above, the parties were unable to mutually agree on a revised sale consideration for the Properties 1. As such, the Board of MEGB had resolved to abort the proposed disposals and proposed ESOS and will consider other alternatives to implement its asset light strategy and raise funds for the company. The Board will make the relevant announcements in due course.

MSWG’S COMMENTS:
Again another corporate exercise of restructuring to revive the business of MEGB fell off eventually with a significantly higher indicative market value by the independent valuer. Shareholders are growing impatient and disappointed to go through multiple corporate proposals and more so they were also astounded by significant fluctuations in the market value of their shares upon the abortion of multiple proposals. The negotiation price of RM75 million, representing a deep discount of 32% to the indicative market valuation would raise the question on how it was possible that the Company could initially have considered such a low indicative sale consideration of RM75 million which was so much below the indicative market valuation although the offer was subjected to independent valuation and shareholders’ approval.


It is even weirder if we go back to the 3rd quarter result of 2013, the company posted a loss of RM 104 Million, and the (rather short) reason it gave was (emphasis mine):


The higher loss before tax was largely due to provision for impairment loss on goodwill and certain of the Group’s property, plant and equipment totaling RM88.2 million.


In other words, it had just written down its property by a large amount. And Siva Kumar offered to buy the property assets at this low valuation, "willing buyer, willing seller". The independent valuer, Cheston International, seems to think the deal is not that great for the other shareholders.