Friday, August 26, 2011

What's up Khoo Khay Peng?

Khoo Khay Peng group of companies offer to buy the remaining of 44.17% of shares in Pan Malaysia Industries for 0.045/share. Prior to this announcement, he is already owns about 31.75%(558k) out of 1,263kk PMI outstanding shares. He bought some more about 300 k shares in the open market between Aug 24 - Aug 26 between 0.04 - 0045/share. That gives him 55.83% interest to make this GO. He paid roughly 2.84X book value when making this offer. I was not sure what he was really going after.

Digging into 2011 Annual Report.

It has 10 million worth of freehold land and another 39 million investment property(13 million land and 26 million building). Those land are located in prime area of around KLCC or Jalan Ampang. They acquired this around 2009 time frame. They paid around 480 - 615 per sq feet. Today could have shot up to 1,500 - 2,000 per sq ft? If that is the case, the land alone worth between 65 million - 86 million. Adding back 26 million building, properties could have worth between 91 million - 112 million.

Their 9%(after dillution) in MUI could only fetch 41 million based on 0.23/share. The way they derive 127 million on their investment in MUI was not based on market price. To go back to this 127 million, MUI share price would have to triple.

Adding up all these assets, it could worth only about 132 - 153 million.

But then it has a liability of close to 150 million. Net of that, he would have nothing left. Unless he believes MUI is worth substantially higher(than what?).

I was not sure whether those bought MUI hoping for corporate exercise will be disappointed. What is clear to me, he is still trying to unlock the value but it will takes time. Those hope to flip it for a quick profit could be disappointed.

Coincidentally, 0.23 is a strong horizontal resistance. Do exercise cautiousness if you want to punt for contra or playing very short term, etc.

Anyway, if I'm PMI shareholders, I will take his offer rather than continue to suffer.


Ivan said...

2011 Annual Reporta:
Asset = Equities + Liabilities
180m = 29.5 + 150.5m

debt was 150.5m!
correct me if i am wrong. how can it consider good ?

Turtleinvestor said...


Of course it's no good. That's why I said I don't what was he went after except redeeming his guilt of screwing up shareholders in the past. He took too much risks and borrow too much and got wiped out in 97 financial crisis.

Ivan said...

Thanks for your reply. If that was not good, why Mr Khoo wanna bought the company? Any good synergy to run the M&A ?