By Khairie Hisyam
Viewed by some as a pervasive presence in Malaysian business, Syed Mokhtar Albukhary is said to still be in an expansionary mood. In this fourth part of the series on the elusive business tycoon, KiniBiz looks at what assets are reportedly in his crosshairs.
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With an impressive business empire leading to concern among some that he poses a systemic risk to the banking sector, Syed Mokhtar Albukhary’s rise in the corporate has been a remarkable story.
The amazing thing is Syed Mokhtar Albukhary is said to be keen on adding more to his portfolio. Can the influential businessman’s reach go even wider and farther?
The collection of ports
Perhaps resonating with his beginnings as a logistics man is talk that he is eyeing a controlling block in NCB Holdings, owner of Northport in Port Klang, which surfaced as the tycoon was finalising his acquisition of Penang Port Sdn Bhd earlier this year.
The Penang Port was the latest in his stable of shipping assets, namely the Port of Tanjung Pelepas and Johor Port controlled via Malaysian Mining Corporation (MMC). Its sale by the Ministry of Finance to Port of Tanjung Pelepas was approved by the Cabinet in late 2010, amid questions over other competitive bids including that from the Penang government which owns the port land.
While an aide of the businessman denied any interest in NCB Holdings in February, a source close to the tycoon informed KiniBiz in March that talks were on-going, although at “a very, very high level”.
NCB wholly owns Northport, which operates a container terminal in Port Klang as well as one of Malaysia’s largest haulage companies Kontena Nasional Sdn Bhd. In 2012, NCB posted a net profit of RM152 million from RM987.2 million in revenue, with over RM1.79 billion in both current and non-current assets against RM353.23 million in total liabilities.
But it is unclear who the tycoon might be buying out if he were to make a move for NCB.
Permodalan Nasional (PNB) owns nearly half of NCB while MISC owns 15.73% of equity. Notably MISC has exited the container shipping scene but has stated that its stake in NCB is for investment purposes.
Is MISC’s 15.73% block what Syed Mokhtar is eyeing?
At the current reference price of RM3.58 per share, NCB’s total market capitalisation stands at over RM1.68 billion. MISC’s stake would have a rough market value of around RM264.8 million.
In addition to Northport, there was also talk of the tycoon eyeing Westports Holdings, although this is unsubstantiated. Westports has since gone for public listing after the rumours surfaced.
On the tracks of transportation
Shipping aside, last year Syed Mokhtar’s MMC was reportedly undertaking due diligence on state-owned Keretapi Tanah Melayu Berhad (KTMB) in early 2012, with a view towards taking over the ailing rail operator.
KTMB operates the national railway line while the rail assets and land are owned by a separate entity, the Railway Assets Corporation (RAC). In total, the assets and land are estimated to be worth approximately RM50 billion.
This sparked a protest over alleged lack of transparency, many questioning why there was no open tender for the privatisation and also questioning what will happen to the nation’s rail assets and land banks following the privatisation.
“Although the assets are parked under RAC, the operator has a big clout on how the assets are utilised,” Parti Keadilan Rakyat (PKR) strategic director Rafizi Ramli was quoted as saying.
KTMB staff even staged a protest against the privatisation, concerned with, among others, the commercialisation of what they saw as a social service. The Railwaymen’s Union of Malaya (RUM) noted that KTMB has been losing RM150 million per year over cheap services.
MMC reportedly planned to inject RM1 billion into KTMB should the takeover happen.
However, prime minister cum finance minister Najib Abdul Razak said in Parliament that no final decision has been made yet over the privatisation of KTMB, although he noted that it is being considered.
“The government is not discounting the possibility of privatising KTMB, to ensure that public rail service is efficient, comfortable and cost-effective,” said Najib, adding that privatisation would ensure KTMB would “not be continuously dependent on government funds like it is now.”
Najib also noted that KTMB’s social responsibility means it is unable to raise enough funds on its own to sustain rising operating costs.
MRT, double-tracking and high-speed rail
Apart from KTMB, Syed Mokhtar is also very much involved in the Mass Rapid Transit (MRT) project in the Klang Valley. His flagship MMC, in a 50:50 joint venture with Gamuda Berhad, is the project delivery partner for the MRT development.
The first line of the MRT, expected to be operational by end-2016, is slated to cost approximately RM20 billion. The huge cost, in light of the nation’s rising debt levels, has cast questions over the financing of MRT Lines 2 and 3.
“By the time the two lines (MRT Lines 2 and 3) commence work, I believe Malaysia will be on better financial footing,” said a government official to KiniBiz, commenting on the issue.
MMC and Gamuda are also working on the electrified double-tracking rail project connecting Perak and Perlis. The 329-km stretch from Ipoh to Padang Besar, worth RM12.485 billion, is expected to be completed in November 2014.
Additionally, in 2009 Syed Mokhtar’s DRB Hicom bid for the Gemas–Johor Bahru double-track railway line project, a 250-km stretch was valued as much as RM8 billion.
However, by early this year the competition for the project is apparently a close thing between prominent businessmen Desmond Lim Siew Choon, Lim Kang Hoo and Tan Kay Hock, and DRB Hicom is presumably out of the picture.
KiniBiz also understands that Syed Mokhtar’s MMC is interested in the Malaysia–Singapore high speed rail project, which will likely see open tender by late next year.
The rail project is expected to cost about RM30 billion, although its passenger projections and other estimates by Suruhanjaya Pengangkutan Awam Darat (Spad) raised eyebrows among the officials of Bank Negara Malaysia (BNM) and the Ministry of International Trade and Industry (Miti).
Expanding in communications?
Late last year, talk surfaced that Syed Mokhtar is eyeing public-listed XOX, a mobile virtual network operator, in a potential takeover bid.
Business Times reported that the takeover would take place as early as January this year, although XOX refuted the claims and informed Bursa Malaysia that it has not received a takeover notice from the businessman.
The interest in XOX was said to be due to its involvement with Celcom Axiata, which in turn has a tie-up with Syed Mokhtar’s wholly owned telco company Puncak Semangat Sdn Bhd.
Under a commercial arrangement, XOX has access to the use of Celcom’s mobile network infrastructure as well as the 010 mobile number prefix, which is previously used by Celcom.
XOX’s subscriber base is estimated to be around the 500,000 mark. According to its latest annual audited accounts for the year ending June 30, 2013, the company recorded a net profit RM4.51 million from RM40.8 million in revenue, with assets totalling RM48 million compared to RM31.84 billion in total debts.
At its current reference price of 13 sen per share, XOX’s market capitalisation stands at about RM39.26 milion.
In turn, Celcom and Puncak Semangat, via the latter’s subsidiary Altel Communications Sdn Bhd, formed an alliance in July this year to share infrastructure, whereby both will cooperate in terms of share infrastructure development, management and operation.
Prior to the tie-up, in late 2012 Puncak Semangat was among eight companies awarded the 4G-LTE (long-term evolution) spectrum band by the Malaysian Communications and Multimedia Commission (MCMC), sparking criticism over the company’s lack of experience and “zero track record” in the telco business.
The eight companies also includes Celcom as well as Maxis Broadband Sdn Bhd, Digi Telecommunications Sdn Bhd, U Mobile Sdn Bhd, REDtone Marketing Sdn Bhd, YTL Communications Sdn Bhd and Packet One Networks (M) Sdn Bhd.
Celcom and Puncak Semangat’s alliance will see them pool their respective 2x 10MHz bandwidth of the 4G-LTE spectrum into a common spectrum, which in turn will mean lower rollout costs for both companies in addition to access of larger bandwidths.
Maxis and U Mobile had entered a similar arrangement in October 2012.
Over the next five years, Puncak Semangat expects to invest RM1 billion into its 4G-LTE network roll-out.
Prior to the alleged interest in XOX, Syed Mokhtar was also said to be interested in Jaring Communications Berhad, which is the first Internet service provider in Malaysia, although the takeover plan did not materialise.
The skies, the steel sector and the media too?
In other business sectors, Syed Mokhtar has also been linked to a potential takeover of Malaysia Airlines (MAS) in the run-up to the 13th general elections this year.
The tycoon’s proposal to the federal government involves buying state investment fund Khazanah Nasional’s 69.37% stake in the ailing airline, possibly involving a long-term fuel subsidy arrangement — for up to 60 years — as part of the deal.
A source close to Syed Mokhtar dismissed the talk of him taking over MAS as “election play”, however other sources confirmed that the deal is still up in the air, though details are sketchy.
MAS has a market capitalisation of about RM1.13 billion at present and Khazanah’s 69.37% stake would have a market value of approximately RM788 million.
While MAS has been having profitability problems recently, analysts expect the airline to turn a small profit in its third quarter results next week, in line with efforts to turn the airline’s financial woes around.
Another company said to be in Syed Mokhtar’s sights is Megasteel Sdn Bhd, which is owned by public-listed Lion Group. However, this is unsubstantiated.
Megasteel is the only integrated flat steel mill producing both hot-rolled and cold-rolled coils, with an annual production capacity of 3.2 million tonnes and 1.45 million tonnes respectively for each type. Being the only domestic manufacturer of hot-rolled coil, Megasteel has dominance in the local market.
Notably, in September the Edge Financial Daily reported that Syed Mokhtar is eyeing a substantial stake in The Malaysian Reserve, the sole financial publication of the Redberry Group.
While Redberry Group manages the marketing and subscription activities of The Malaysian Reserve, it is published by Syed Hussain Publications (SHP). According to the report, the interest arose after the elusive magnate’s application for a publishing licence was not approved by the home ministry.
However, Redberry owner and managing director Siew Ka Wai denied the takeover speculation.
“Plenty of people have approached us for a stake or our assets but no, I have not heard from (Syed Mokhtar),” said Siew to KiniBiz in response to the news report.
How big is too big?
Syed Mokhtar’s current wealth — at least, what parts of it can be gauged — places his expansion prospects in a fascinating light.
Forbes earlier this year estimated the tycoon’s net worth as about RM10.5 billion, and given the diversity of his assets and fragmented shareholdings, the actual extent of his wealth remains unclear.
Already far-reaching and wielding significant influence in the Malaysian corporate scene, there has been grumbles even from within Barisan Nasional of whether Syed Mokhtar is controlling too much.
“Why must we make one man king?” asked Kinabatangan member of parliament Bung Mokhtar Radin last year in reference to Syed Mokhtar.
With apparently on-going expansionary efforts in various fronts especially in terms of shipping and logistics, the tycoon’s already significant holdings — already sparking worries that he is becoming a systemic risk to the banking sector with his cumulative debt of more than RM28 billion — look set to continue growing one way or another.
Can one man really hold too many assets? Amid expectations that Syed Mokhtar’s empire will continue to grow, the answer to that question remains unclear.
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