By Jose Barrock
In the second part of our issue piece on businessman Syed Moktar Albukhary, we look at his meteoric rise to power, and how he has amassed considerable wealth.
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Syed Mokhtar Albukhary’s rise in corporate Malaysia has been a spectacular one considering his humble beginnings at Kampung Hutan Keriang in Alor Setar, Kedah, Malaysia’s northern most state. How he made it to such great riches is actually an interesting tale.
“His is a story of hard work and dedication…there were no sweet-heart deals for him (Syed Mokhtar),” an aide had once said. Most however, would differ from this view, suggesting Syed Mokhtar has been a beneficiary instead based on his close ties to the Government and its leaders.
The transport business as a start
His first business was in transportation, where he started Syarikat Kenderaan Sentosa (SKS) in 1972 transporting rice. (Sentosa was the name of the hotel he stayed in when in Kuala Lumpur, he said in his autobiography released last year).
Not bad for a 21 year old.
The reason for him seeking to transport rice was because he had some knowledge of rice and padi, having worked at his grandfather’s padi plantations growing up.
A few years later in 1975, he applied for a rice-trading licence from Lembaga Padi dan Beras Negara, and got it issued to his company Shah Enterprises Sdn Bhd. A year later in 1976, he injected his lorries as consideration for a 42% stake in Bukhary Sdn Bhd, which became a known rice trading outfit.
Till today Syed Mokhtar has a penchant for injecting assets into companies for shares, which has resulted in many terming him an asset trader.
As a rice trader, Syed Mokhtar made inroads into many Government bodies such as MARA or Majlis Amanah Rakyat, and Sergam Bhd among others.
Sergam’s managing director from 1974 to 1977 was one Muhyiddin Yassin now deputy prime minister, who is still a good friend of Syed Mokhtar’s till today. The two first met in 1976.
Other people of influence he encountered and became close to included rice trader Syed Razak Syed Zain, who went on to become the Menteri Besar of Kedah from 1999 to 2005 and Shahidan Kassim, who was a civil servant but went on to become the Menteri Besar of Perlis from 1995 to 2008 and is now a minister in the Prime Minister’s Department.
He got a break when he secured a contract to supply 120,000 pairs of safety boots for army personnel, based on which he started what is now Amtek Holdings. Another contract for 330,000 army uniforms from the Government, led to his setting up Oriental Garments.
By 30, Syed Mokhtar was a millionaire.
During the go-go years between 1990 and 1997, according to his biography he was a shareholder in as many as 15 publicly traded companies.
Meeting Mahathir
During a meeting with this writer a few years ago, Syed Mokhtar said he first met Dr Mahathir Mohamad, then prime minister, on Jan 16, 1997, at 2.30pm.
Five months later on May 15, 1997, Mahathir officiated the ground-breaking ceremony for the Islamic Museum which Syed Mokhtar built, in what is said by many to be a fruitful, long term relationship.
In his autobiography Syed Mokhtar refers to his relationship with Mahathir as one of mentor and mentee, with him often seeking advice from the premier.
Due to this close relationship, many have speculated that Syed Mokhtar is Mahathir’s or Umno’s proxy, but this of course is unsubstantiated, and cannot be proven.
An aide of Syed Mokhtar once said that the back-biting was the reason why Syed Mokhtar didn’t surface earlier in corporate Malaysia.
“It’s basically dengki (the Malay word for jealousy)…that’s the problem, people’s jealousy,” the aide had said referring to the back-biting and suggestions that Syed Mokhtar was holding assets for Mahathir.
Even when he surfaced in his flagship MMC Corp (then Malaysia Mining Corp) in October 2000, taking up a 19.9% stake for RM499.18 million or RM3 per share, buying the block from Permodalan Nasional, he didn’t surface in the private company Impian Teladan Sdn Bhd, preferring instead to use proxies.
It was the same when Restu Jernih Sdn Bhd bought into Pernas International Holdings (since renamed Tradewinds) – he didn’t surface. Likewise in water concessionaire Aliran Ihsan Resources, and Padiberas Nasional and many other companies he was involved in.
This opacity resulted in many funds shunning his stocks. Other than the local funds, foreign funds generally are not known to hold shares in his companies.
“There was no real clarity in the shareholding structure then, and in Malaysia you need to know who the shareholders are before you invest…so it is was not really our cup of tea,” a fund manager from a foreign insurance company said.
Nevertheless much of the speculation regarding Syed Mokhtar has been due to the large number of choice assets he has accumulated over the years.
Many choice assets
Today under his flagship MMC he has 51% in independent power producer Malakoff Corp, 30.9% in Gas Malaysia, 70% of Port of Tanjung Pelepas Sdn Bhd, Johor Port, water concessionaire Alirah Ihsan and via joint ventures with construction giant Gamuda, MMC has 50% of the RM12 billion double tracking project linking Ipoh to Padang Besar and 50% of the Klang Valley MRT Sdn Bhd in which his MMC is partnering Gamuda as the project delivery partner.
Under his other vehicle DRB Hicom he has Proton Holdings, 32.2% of Pos Malaysia and 70% of Bank Muamalat to name a few of his assets.
Under Tradewinds, his other group of companies he has Padiberas Nasional (Bernas) and Central Sugar Refineries Sdn Bhd to name a few of the assets.
(For a clearer picture see chart yesterday)
While many say that he obtained the assets as a result of Mahathir’s patronage, his aide pointed out that the acquisition of Tradewinds, which was then Pernas International Holdings, was done at RM497 million or RM2.10 per share and 64 sen per warrant from Perbadanan Nasional or Pernas.
Pernas was set up in 1969 to promote Malay capital ownership, but the lumbering giant corporation failed in its agenda, and bled losses. As such the deal was viewed by many as a bailout of an earlier privatisation attempt. Syed Mokhtar actually paid a hefty premium in buying the company.
As for Proton Holdings, his DRB Hicom forked out some RM3 billion and privatised the automaker, in a tender process at RM5.50 a share. DRB Hicom also took just over a 32% stake in Pos Malaysia for RM3.60 per share or RM622.8 million.
“He won the two assets, (Proton Holdings and Pos Malaysia) fair and square. No political intervention…he bid the best price, what do you want us to do, give it to a lower bidder?” an official of Khazanah Nasional Bhd had said back when the sales were concluded.
There are also some who say that Syed Mokhtar could be a proxy for current premier Najib and/or Umno, due to the large number of assets he has accumulated under Najib’s rule. But this as well is merely speculation.
However one hold Syed Mokhtar does have on the current premier is DRB’s plant in Pekan which is in Najib’s constituency.
“DRB could be the largest employer in Pekan,” an opposition linked market watcher said.
More recently his Puncak Semangat Sdn Bhd was one of eight awarded LTE (long term evolution) 2600MHz spectrum by the Malaysian Communications and Multimedia Commission (MCMC) to provide 4G services.
A subsidiary of Puncak Semangat’s Altel Communications Sdn Bhd, is investing in excess of RM1 billion over the next five years to deploy its 4G long-term evolution LTE network, which will be rolled out by the fourth quarter of this year.
In July this year, Altel Communications tied up with Khazanah Nasional’s Celcom Axiata, to jointly develop, establish, build, operate and manage shared infrastructure, via the pooling of their respective 2x 10MHz bandwidth of the LTE2600 MHz spectrum awarded by the MCMC.
“You cannot go to bed with such giants such as Khazanah without the blessing of the powers that be,” a market watcher comments.
Under Malakoff there are four independent power producers (IPPs), one of which is Tanjung Bin Power Sdn Bhd, which holds the concessions for the 2,100MW Tanjung Bin coal-fired power plant.
The Tanjong Bin licence was given to Syed Mokhtar controlled SKS Ventures Sdn Bhd, which subsequently sold the Tanjong Bin power plant licence to Malakoff for RM840 million cash.
“You can only pull off such stunts if you have the right political connections,” the market watcher added.
But while Syed Mokhtar has built up his asset base over the past few decades, there are fears that he may have bitten of more than he can chew, resulting in him having accumulated heavy debts.
In some circles they even refer to him as a systemic risk to the banking system of the country.
Yesterday: The sprawling empire of Syed Mokhtar Albukhary
Tomorrow: With RM28 bil in debt, is Syed Mokhtar a systemic risk?
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