Chen’s stocks gain traction

PETALING JAYA: The three companies controlled by tycoon Tan Sri Dr Chen Lip Keong — FACB Industries Inc Bhd (FACBI), PETALING TIN BHD [] and KARAMBUNAI CORP BHD [] — emerged as top active counters yesterday.

Investors turned their attention to Chen-linked counters following an announcement by FACBI last week on the disposal of assets worth RM131.5 million and its plan to disburse a portion of the proceeds to its shareholders.

FACBI’s proposal sparked a rally in its stock and generated interest in sister companies Petaling Tin and Karambunai. Investors expect Chen to potentially look at unlocking the value of the latter two companies that he controls as well.

Investors have warmed up to Chen, more well-known as the biggest casino operator in Cambodia, as FACBI’s proposal serves to reward minority shareholders rather than the usual cheap privatisation practised by some corporate figures.

“The good thing is that Chen didn’t attempt to privatise FACBI cheaply and to dispose of the assets at a high value to pocket the gains himself. In FACBI’s proposal, all the shareholders benefit — the stock has doubled over the past week,” said a dealer with a local investment bank.

FACBI recently proposed the sale of a piece of land in Shah Alam, Selangor, and its stainless steel pipe manufacturing arm for a total of RM131.5 million in cash.

The proceeds from the sale will boost FACBI’s cash pile from RM26.14 million as at Sept 30 to RM160 million or RM1.85 per share. That’s a huge sum considering that FACBI is debt free and its market capitalisation is less than RM90 million.

Not all brokers are equally convinced the sudden surge in trading volume of Petaling Tin and Karambunai would sustain.

“These may be speculative plays because the two companies share the same owner as FACBI,” said a remisier.

Nevertheless, like FACBI and other small-cap counters, Petaling Tin and Karambunai are trading significantly below their net asset values. Hence, the potential realisation of assets after unlocking the value would reward shareholders handsomely.

For Petaling Tin, in which Chen’s son Chen Yiy Fon is CEO, its market capitalisation is currently RM114 million but its net asset value is over RM350 million. The company is involved in commercial township and industrial developments in Selangor, Negri Sembilan and Sabah.

“If any, Petaling Tin’s head office in Jalan Semangat in Petaling Jaya has great redevelopment potential.

The land size is about 90,000 sq ft and the property was [on] the books for only about RM17 million,” said a financial executive familiar with the company.

Karambunai, which owns over 600 acres of land for resort development in Kota Kinabalu, Sabah, and 550 acres in Sepang, Selangor, was previously rumoured to have plans to develop a gaming resort in Sabah. While market watchers said the plan would be hard to realise given the heavy political backlash it would receive, the landbank is still sizeable.

Karambunai has a market value of RM243 million and its net asset value is over RM570 million.

To sum it up, these three companies that Chen controls are either loss-making or mildly profitable. But having said that, an asset divestment like that at FACBI does come as a surprise, given the significant value it has unlocked for shareholders.

And although the three companies may seem small, Chen himself is a corporate bigwig and is well-known for his casino operations in Cambodia.

He is the founder of Hong Kong-listed NagaCorp Ltd, which owns and operates NagaWorld, the largest and only licensed casino in Cambodia’s capital city, Phnom Penh.

Chen is group CEO and executive director of NagaCorp and he holds a controlling 63.07% stake with a market capitalisation of HK$9.91 billion (RM3.9 billion).

This article first appeared in The Edge Financial Daily, on Dec 18, 2012.