Proceeds from such divestments will help fund the S$3.5 billion (RM8.2 billion) Parkway offer, although Khazanah has also reportedly lined up S$2.7 billion in financing for the deal.
Last Friday, Khazanah completed the private placement of its 5% stake in Telekom Malaysia Bhd, through Maybank Investment Bank Bhd and Nomura Singapore Ltd, raising RM581 million.
Khazanah’s wholly-owned unit UEM Group Bhd is in the process of selling its 86.8% stake in Pharmaniaga to Boustead Holdings Bhd for RM534 million, which was announced on June 11.
These recent moves including the shifting of Khazanah’s 19.7% stake in PT Bank CIMB Niaga TBK to CIMB Group Holdings Bhd, “suggest further corporate activities ahead”, said Maybank Investment Bank Research in a report yesterday.
The shifting of Khazanah’s CIMB Niaga stake would raise its holdings in CIMB Group. At the same time, the research report pointed out that Khazanah has a 10% stake in EON Capital Bhd, and is said to favour Hong Leong Bank Bhd’s RM5.06 billion bid for EON Cap’s business.
Such divestments would also be in line with Prime Minister Datuk Seri Najib Razak’s call, made at last year’s “Invest Malaysia” investors’ conference, for government-linked investment companies (GLICs) to reduce their shareholdings in order to raise free float levels and liquidity in the equity market.
According to Maybank IB Research, Khazanah’s substantial shareholdings in Malaysian public-listed companies are worth an estimated RM75.5 billion. The investment agency’s largest holdings are in Axiata Group Bhd (44.5%), CIMB Group Holdings Bhd (28.4%), Tenaga Nasional Bhd (35.7%) and PLUS Expressways Bhd (55.3%) worth a total of RM54 billion. They make up 65% of the investment value of its holdings in Malaysian listed-companies.
Maybank IB Research identified several likely assets where Khazanah could possibly lower its shareholding or exit altogether in the near term of about six months, including those under UEM Group.
“The likely assets (for divestment) are PLUS Expressways Bhd, CIMB Group Holdings Bhd, Tenaga Nasional Bhd, Time Engineering Bhd, TIME dotCom Bhd and DRB-Hicom Bhd,” said the report.
It estimates that Khazanah can divest up to 7% stake in PLUS, 2% in CIMB Group and 2% in Tenaga. For its holdings in TIME dotCom (47%), Time Engineering (45%) and DRB-Hicom (5.1%), which are non-strategic, the investment agency could pull out completely.
Based on current market values, these holdings are worth a total of some RM4.1 billion. Together with ongoing disposal of Pharmaniaga by UEM Group, the sale of the EON Cap stake and Khazanah’s intended disposal of its entire 32.2% stake in Pos Malaysia Bhd, the investment agency can potentially realise RM5.7 billion, according to Maybank IB Research (see table).
Maybank IB Research sees that such an exercise will be market friendly. “Overall, we believe the paring down of holdings by Khazanah and other GLICs especially in big-cap stocks will be positive for the market in raising trading liquidity.
“This may also draw foreign interest whose holdings in equities have stayed in the 20% to 21% range since December 2008,” it said.
Foreign holdings of Malaysian equities as of June 2010 stands at 20.6%. Maybank IB Research has a buy call on PLUS, a hold call on CIMB Group and Tenaga remains a sell.
This article appeared in The Edge Financial Daily, July 30, 2010.
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