Sitting on a big cash pile after the divestment, JAB will reward its shareholders with special dividend while looking for new core businesses.
Speaking in a media briefing yesterday, its chairman Datuk Lim Chee Wah said JAB would reward its shareholders with parts of the cash proceeds.
“As to the quantum, we would need to balance out how much is to be paid out as special dividends and how much is required to be kept so the company is in a good cash position to explore new core businesses,” he said.
As for the potential new core businesses, JAB will not rush into any business that comes along and the cash-rich group would take its time to evaluate proposals.
“We will evaluate carefully where the future plan of the company is. It is a major business decision, and we want to ensure that the new core business that we embark on would be in the best interests of our shareholders,” said its managing director Tam Chiew Lin.
When asked if the company would consider another jab into the financial sector, Tam said it would keep its mind open and consider any possibilities beyond that.
Interestingly, Tam noted that given the sizeable cash coffer of RM635 million, there was a possibility of other companies “looking at us. We would make the necessary announcements when the time comes”.
Cash balance of RM635 million translates into gross cash per share of RM3.51.
Commenting on the price of the divestment, Lim said ACE “had simply offered the better price”. Based on JIB’s net asset of RM291.3 million as at Dec 31, 2009, the deal has a price-to-book value of 2.25 times, which Lim considers to be a “decent and reasonable price”.
The sum was arrived at on a willing buyer-willing seller basis through a bidding process, which also saw other potential buyers eyeing the lucrative general insurance business. However, he declined to reveal who the remaining bidders were.
The total price for JIB is RM654 million, with JAB receiving RM523.2 million for its 80% stake. The remaining 20% stake is held by Paramount Global Assets Sdn Bhd, which would receive RM130.8 million from the sale.
Post-disposal, JAB would see its net assets increase to RM723.49 million from RM434.95 million, with net asset per share improving to RM4.00 from RM2.41. The sale would also see its cash and bank balances rise 46% to RM635.34 million from RM434.44 million.
JAB is expected to see a proforma gain of RM302.9 million from the disposal which is expected to be completed by year-end.
As for its other subsidiaries which are involved in insurance businesses overseas, Tam said there is no intention to dispose of them.
“Our overseas operations would be business as usual. As you know, insurance has a long gestation period and we would not be selling it,” said Tam.
The sale of JIB was first made known in December last year, when JAB, 37% owned by the Kuok group, announced that it was entering talks to sell its unlisted insurance arm JIB.
On the rationale for the divestment, JAB said JIB had grown to a size which a tie-up with a strong and strategic insurance operator would spur it to the next level of growth.
“The ACE group is a global insurance player with technical expertise and experience in the local market. As it also has a global reach and financial resources, the board believe that the ACE group would be able to drive the next expansion of growth for JIB,” it said in a statement.
For the first half ended June 30, 2010, JAB posted a net profit of RM22.45 million, on the back of RM145.8 million in revenue. Its cash and bank balances stood at RM49.5 million, with shareholders’ fund at RM468.15 million.
JAB share price has rallied since the talks on the divestment. The stock surged from the low of RM1.20 in November last year to a high of RM3.40 in August this year. It closed four sen lower yesterday to RM2.89 with 247,000 shares traded.
This article appeared in The Edge Financial Daily, October 8, 2010.
No comments:
Post a Comment