By Sharen Kaur
sharen@nstp.com.my
Published in NST on December 21 2011
MMC Corp Bhd’s plan to buy over Keretapi Tanah Melayu Bhd (KTMB) could be a prelude to a bigger job offer from the government, analysts say.
Affin Securities analyst Chong Lee Len believes that MMC or its controlling stakeholder Tan Sri Syed Mokhtar Al-Bukhary may get a “sweetener” from the government for taking over KTMB.
Jupiter Securities head of research Pong Teng Siew also thinks the government may offer MMC a huge contract for helping to take over the loss-making company.
Business Times reported on Monday that MMC was undertaking a due diligence to privatise KTMB and pump in some RM1 billion to take control of its operations. MMC has confirmed the report.
KTMB, which has been a takeover target for a long time, has been bleeding red ink since its corporatisation in 1992 due to high operating costs.
The national railway company did make a net profit of RM9 million to RM15 million from 1993 to 1995, before falling into the red again in the following years.
Pong believes the RM1 billion investment by MMC may not be enough to stop it from bleeding.
“I think MMC may not be able to swallow KTMB because of its size and unprofitable business. Our railway lines are short haul railway and you won’t get the kind of economies of scale as you would with long haul railway like in the West.
“The commuter trains are also heavily subsidised for the simple reason they can’t make money. I’m not sure why MMC think they can turn around KTMB unless they are getting something out of the deal,” Pong told Business Times.
The analysts are not so worried that MMC is stretching its borrowings to acquire assets.
The company recently said it is buying Penang Port, while another Syed Mokhtar’s company, DRB-HICOM Bhd, is bidding for a stake in Proton Holdings Bhd.
MMC is currently Malaysia’s single largest borrower with net gearing level of 218 per cent. As at September 30 2011, it has debts of RM19.4 billion.
“Some RM16.2 billion of the borrowings are mainly to finance power projects, which are a cash-generating business for MMC.
“I don’t think MMC will have issues with financing all its deals as it has strong bankers’ support,” Pong said.
Chong, meanwhile, said the listing of Gas Malaysia Sdn Bhd next year and the possibility of Malakoff Bhd being floated on the stock exchange will provide cashflow for MMC to take up new acquisitions.
OSK Research believes MMC’s balance sheet may be stretched by the development unless other asset sales are in the pipeline.
sharen@nstp.com.my
Published in NST on December 21 2011
MMC Corp Bhd’s plan to buy over Keretapi Tanah Melayu Bhd (KTMB) could be a prelude to a bigger job offer from the government, analysts say.
Jupiter Securities head of research Pong Teng Siew also thinks the government may offer MMC a huge contract for helping to take over the loss-making company.
Business Times reported on Monday that MMC was undertaking a due diligence to privatise KTMB and pump in some RM1 billion to take control of its operations. MMC has confirmed the report.
KTMB, which has been a takeover target for a long time, has been bleeding red ink since its corporatisation in 1992 due to high operating costs.
Pong believes the RM1 billion investment by MMC may not be enough to stop it from bleeding.
“I think MMC may not be able to swallow KTMB because of its size and unprofitable business. Our railway lines are short haul railway and you won’t get the kind of economies of scale as you would with long haul railway like in the West.
“The commuter trains are also heavily subsidised for the simple reason they can’t make money. I’m not sure why MMC think they can turn around KTMB unless they are getting something out of the deal,” Pong told Business Times.
The analysts are not so worried that MMC is stretching its borrowings to acquire assets.
The company recently said it is buying Penang Port, while another Syed Mokhtar’s company, DRB-HICOM Bhd, is bidding for a stake in Proton Holdings Bhd.
MMC is currently Malaysia’s single largest borrower with net gearing level of 218 per cent. As at September 30 2011, it has debts of RM19.4 billion.
“Some RM16.2 billion of the borrowings are mainly to finance power projects, which are a cash-generating business for MMC.
“I don’t think MMC will have issues with financing all its deals as it has strong bankers’ support,” Pong said.
Chong, meanwhile, said the listing of Gas Malaysia Sdn Bhd next year and the possibility of Malakoff Bhd being floated on the stock exchange will provide cashflow for MMC to take up new acquisitions.
OSK Research believes MMC’s balance sheet may be stretched by the development unless other asset sales are in the pipeline.
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