by winston » Mon May 09, 2016 10:02 am
vested
MAA’s growing cash pile fails to boost share price
BY SHARIDAN M. ALI
PETALING JAYA: Despite the proposed sale of its Takaful arm and a special dividend of 35 sen per share, MAA Group Bhd’s latest corporate announcements have done little to attract investors’ interest to the stock, as reflected in its share price movements.
On Friday, MAA’s share price ended lower by 5 sen to RM1.15 following the announcement of a conditional share purchase agreement with the purchaser to dispose its stake in MAA Takaful Bhd a day before. The exercise would see its cash pile swell to about RM580mil, or more than RM2.30 per share.
“This could be due to the uncertainties of the direction of the company despite it being cash-rich and debt-free.
“The company has to decide soon on the direction to invest in a new core business. It is probably clouding investors’ interest, who are not able to see a clearer future of the company,” a broker said.
There is also speculation that the company, which has been buying back its shares, could be taken private by its executive chairman Tunku Ya’acob Tunku Abdullah (pic), brokers said.
To be fair, MAA’s share price did move up by 8.5% to the current level of RM1.15 since the announcement on April 26. The company has Bank Negara’s approval to dispose it 75% stake in the takaful insurance arm to Zurich Insurance Company Ltd.
Nevertheless, at RM1.15, the share price is still below the RM1.41 net asset value per share as at Dec 31, 2015.
The company has cash and cash equivalents totalling RM350.51mil as at Dec 31, 2015, while its assets for sale are worth over RM6mil in that period.
The proposed sale of MAA Takaful would also help to grow its coffers. MAA is forecasted to gain gross proceeds of RM393.7mil from the stake sale.
It has earmarked about RM196.7mil from the proceeds for future investments opportunity within 24 months of the completion date of the takaful arm sale.
However, MAA has yet to outline the future direction of the company apart from the proposed special interim dividend of 35 sen per share.
Nevertheless, MAA could also see light at the end of the tunnel from the disposal, as prior to the proposed sale, MAA Group’s activities had been restricted by the Islamic Financial Services Act 2013 (IFSA), due to its Takaful business.
The restrictions under the IFSA had made it difficult for MAA to get out of its PN17 status.
It was classified as a PN17 due to inadequate business and under the central bank’s regulations, MAA can only acquire businesses that are related to the financial services.
“Valuations of assets in the financial services industry has been high so MAA was in a fix,” said an official close to the company.
With the sale of the takaful insurance business, MAA would no longer be restricted to only acquire assets in the financial sector.
On Thursday, the financial services provider had announced it has entered into a conditional share sale purchase agreement to dispose MAA Takaful Bhd to Zurich Insurance Company Ltd for RM525mil.
MAA has a 75% equity interest in the takaful arm while the Solidarity Group Holding BSC’s (Closed) has 25% stake.
“Given the issues that MAA Group has had, there was talk of MAA being taken private to reduce scrutiny,” said a broker. In the past, it was speculated that MAA Group was looking at a proposed rights issue, injection of assets into its business or even consider a joint venture partner. There was also talk that the company could become a target for a reverse takeover.
However, in its notes accompanying its 2015 earnings, MAA Group had said that it would remain listed if it came out of the PN17 list.
“On the PN17 status of the company, it is the board’s intention to maintain the listing status of the company,” it said.
Source: The Star
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