corporate
true
TigerTalk  |  DECEMBER 22, 2015 4:11AM

Utusan’s wet-dream deal – genius, luck or…?

Story by
[email protected]

fiery tigertalk inside storyIn a span of eight months, a little piece of investment by Utusan Melayu has skyrocketed in value beyond every sensible investor’s wettest dreams… but how?

In case you missed it, on Dec 21, 2015 loss-making Utusan Melayu (M) Berhad announced what may seem a strong candidate as any for deal of the year – it is selling a 20% stake in a private company for what is essentially 47,900% return on investment after just eight months.

By any measure this stunning gain is a great boon to Utusan, which has been staring at nine consecutive quarters in the red. For the latest concluded quarter ended Sept 30, 2015, the company recorded a pre-tax loss of RM7.85 million as revenue slipped 18% year-on-year to RM61 million.

According to the terms of the deal announced to Bursa Malaysia, Utusan will get RM5 million upfront after the share sale agreement is inked with the balance to be paid by the end of the second quarter of 2016. Looks like we can expect a bumper second quarter for Utusan, eh?

But hang on, its shareholders – and the rest of Bursa Malaysia citizens, eager to pick up great investment tips – may say. How did Utusan accomplish this stunning feat and what company did the stake pertain to? That’s where things get a little weird.

The company is called Maqamad Sdn Bhd, which according to public records is involved in property development and general trading. In a regulatory filing, Utusan said its original cost of investment for the 20% was RM100,000 incurred in April 2015 and it is now selling that stake to the majority shareholder of Maqamad for a whopping RM48 million.

utusan logoThat buyer is MHA59 Sdn Bhd, which is 90% owned by one Mohd Hassan Bin Abu who is also one of only two directors in Maqamad. MHA59 Sdn Bhd is buying over this 20% to “assume full control of Maqamad”, said Utusan.

Well, then, for MHA59 to be paying RM48 million for a stake that cost only RM100,000 just eight months prior, the company must be an outstanding cash cow that had seen an amazing turnaround in fortunes since Utusan forked out its RM100,000, no?

We don’t quite know, though. Latest available records from the Companies Commission of Malaysia show that Maqamad posted a revenue of RM163 (yes, no zeroes missing there) for the 2013 financial year ended Dec 31, 2013 (FY13) with a net loss of RM523,880.

For the previous financial year, FY12, Maqamad was deeper in red with RM1.77 million in net loss compared to RM297 (again, just three digits) in revenue. Reserves are in negative territory at –RM2.3 million as at FY13.

It is not immediately known how Maqamad performed financially for FY14 – by right its annual report should be tabled by June 30, 2015 but is not yet available from the Commission.

This leaves a very, very (very) faint possibility that Maqamad had somehow turned things around rapidly in the space of 12 months, such that its equity value skyrocketed beyond every investor’s wettest dreams and the gains from which Utusan is now reaping.

And if that is the case then it would have been an extremely remarkable turnaround indeed. One that CEOs of distressed companies everywhere may do well to learn from. Because the dismal revenue against gaping losses seen in FY12 and FY13 aside, as of FY13 Maqamad only had over RM23,000 in current and non-current assets against RM1.82 million in current liabilities.

So how? Obviously MHA59 and its shareholders must have thought that the 20% equity is worth RM48 million for some reason or another – the payment was arrived at on a willing-buyer-willing-seller basis, according to Utusan’s declaration to the stock exchange.

At this stage we can only guess without knowing if Maqamad had indeed accomplished a stunning reversal of fortunes in FY14. Perhaps it did and Utusan just got really, really lucky to have picked this particular company to invest in.

Berkshire Hathaway Inc chairman & chief executive officer Warren Buffett

Warren Buffett

Or maybe it wasn’t luck after all. What about the possibility that Utusan has been harbouring the Malaysian answer to Warren Buffett all this while? Possible, possible… the possibilities are endless. Numbers don’t lie and Utusan really is selling what it says was worth RM100,000 eight months ago for RM48 million now.

With an investment manager able to pick out an investment giving 47,900% in returns within an eight-month timeframe lurking in our midst, perhaps Khazanah Nasional extended the contract of its managing director Azman Mokhtar a tad too hastily, eh?

GRRRRR!!!



 
Comments
comments powered by Disqus
 
181857
1
1
1
0
latest
1