On paper the proposal to inject Senai Airport Terminal Services Sdn Bhd (SATS) into MMC Corp Berhad looks yummy. Besides container haulage company JP Logistics Sdn Bhd, the MMC Group’s two main ports – Port of Tanjung Pelepas (in southwest Johor) and Johor Port (in Pasir Gudang) could provide the logistics synergies with the addition of freight (SATS) into the group. MMC will issue 696.4 million new shares at an issue price of RM2.80 per share to pay for SATS.

However it didn’t take analysts hours to realize that the all-share RM1.95 billion deal was too pricey and hence the stock price was severely punished. The stock price tumbled more than 20 percent, its biggest plunge since Sept 1998, after analysts dump the shares and downgrade the stock. It’s another plan by tycoon Syed Mokhtar Albukhary to transfer the ownership of SATS to MMC Corp – also controlled by him. The problem of the deal – SATS is a loss-making company with unaudited losses of RM25mil and net tangible asset (NTA) of RM295mil as of FY08 June 30. SATS’ FY07 audited accounts are not any impressive – a negative NTA of RM64 million.

Furthermore by issueing new shares, the MMC Corp’s floating share is expected to increase by 23% and such dilution is not something that you should be proud of. Analysts think MMC was paying too high a price of 6.6 times NTA for a loss-making business. But that’s how the tycoon makes instant money, not to mention the intention to “use-up” the money to the maximum before the next windfall-tax comes and take it away. It would be great if MMC Corp.’s financial statement could be designed to look as bad as possible. Before the authorities come knocking on the door asking for money, it’s wise to transfer it elsewhere. Berjaya owner Vincent Tan was a specialist in moving his money around within his empire.

Sure, SATS acquisition comes bundled with 2,718.68 acres of land as the sweeteners but these lands are not located anywhere near KLCC or MidValley so the deal is still a lousy one, frankly speaking. So what if SATS had a 50-year a government concession to manage Senai Airport? SATS handled pathetic 1.6 million passengers only in 2007 and nobody in their right minds would think Senai Airport could flourish in anyway into the future. Hmmm, Maybank should be able to smile now that its local buddy is over-paying for SATS.

Other Articles That May Interest You …

• Maybank’s losses before it can even make a penny
• Windfall Tax – Punishment or Desperation for Money?
• Transmile’s sudden Spring to Life, what’s in the pot?
• How much could Primus Pacific expand EON Capital?
• Syed Mokhtar only interested in RM597 million

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August 5th, 2008 by financetwitter

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