Stake buyer Seaview is partly owned by a close business associate of Johor royalty

by **Cals** Sun 23 Feb 2014, 05:41

Published: Saturday February 22, 2014 MYT 12:00:00 AM
Updated: Saturday February 22, 2014 MYT 11:03:01 AM
Stake buyer Seaview is partly owned by a close business associate of Johor royalty
BY CECILIA KOK
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Sultan Ibrahim at the launch of the Astaka @ 1 Bukit Senyum in Johor Baru recently. With him are (from left) Astak a Padu Sdn Bhd CEO Datuk Zamani Kasim, Johor Mentri Besar Datuk Seri Mohamed Khaled Nordin and Daing A Malek.

THE speed at which the proposed transaction involving privately-held Seaview Holdings Sdn Bhd’s of a majority stake in Damanasara Realty Bhd (DRealty) seems to suggest that the deal is all sewn up, leaving only the formalities to take place.
A day after Seaview, a company that counts on some influential personalities from Johor as its shareholders, made the offer to Johor Corp Bhd (JCorp) to acquire a 51% in DRealty, the state investment arm came out with a statement on why it was accepting the deal.
The deal values DRealty at 50 sen per share. JCorp will get RM78.9mil from the proposed sale that will involve a mandatory general offer (MGO).
But that offer is not likely to be well received because the current market price of DRealty is higher than the offer price. So why bother with the MGO?
The question is why would JCorp divest its stake in DRealty? It has a fairly clean balance sheet and was at one time touted to be the property arm of JCorp. To add to its credit, DRealty has some car parking business that provides it with a small amount but steady cashflow.

Bigger plans ahead
According to industry observers, JCorp has not really worked on DRealty and that makes it an ideal vehicle for a reverse takeover of its property assets.
“However, nothing was done over the years to enhance the potential of DRealty and to unlock its value. DRealty would have been an ideal vehicle for asset rich JCorp to inject its property assets and turn it into a property play,” he says.
In fact, DRealty was pivotal in one of the restructuring schemes proposed for JCorp about four years ago. But the scheme, that was presented to former Johor Mentri Besar Datuk Abdul Ghani Othman, did not take off.
Since then, it has languished rudderless. The company’s share price, for one, had remained stagnant until the announcement of the share-sale deal between JCorp and Seaview.
Considering DRealty’s potential, industry observers are optimistic that the entry of Seaview into DRealty will turn the latter’s fortunes around.
A source notes the entry of Seaview is a prelude to the injection of new businesses that could enhance the value DRealty in the longer term.
Another believes the completion of the proposed share acquisition by Seaview will pave the way for more significant individuals who are linked to the Johor royal family to enter into DRealty, and subsequently drive the latter’s growth.
It is interesting to note that Seaview belongs to individuals with ties to the Johor royal family.
The company is equally owned by Datuk Daing A Malek Daing A Rahaman andAbdul Aziz Daing Rahman.
Daing A Malek is a member of the Council of the Royal Court of Advisers to the Sultan of Johor and a close business associate of Johor royalty.

Fair deal?
“Given the wealth of experience of Seaview’s controlling shareholders, we believe their professional and entrepreneurial skills can contribute significantly to the long-term prospects and financial sustainability of Drealty,” JCorp president and chief executive Datuk Kamaruzzaman Abu Kassim says in a statement explaining the rationale of it disposing of a substantial stake in DRealty to Seaview.
The move, explains Kamaruzzaman, is in line with the state investment arm’s plan to reduce its exposure in non-core businesses under an ongoing corporate-restructuring exercise.
Seaview’s offer of 50 sen per DRealty share represents a premium of 23.2% over the latter’s net assets per share of 40.6 sen as at Sept 30, 2013.
The offer values DRealty at 1.35 times its last-known book value per share of 37 sen.
“The deal seems good based on the premium of the offer against DRealty’s net assets,” an analyst says.
DRealty’s shares have steadily gone up since the end of December 2013.
From 37.5 sen on Dec 27, 2013, DRealty’s shares rose to a two-year high of 64 sen on Feb 19, after the announcement of Seaview’s offer.
The company’s shares closed at 59.5 sen on Friday.
Kamaruzzaman says JCorp intends to remain as one of the major shareholders in DRealty upon completion of the exercise that will see the JCorp’s current stake in DRealty reduced from 64.8% to 13.8%.
At present, asset-rich but debt-laden JCorp and its group of companies, namelySindora Bhd, Damansara Asset Sdn Bhd, Harta Consult Sdn Bhd and Kulim (M) Bhd, have a tight grip on DRealty.
According to Bloomberg data, the group collectively own about an 85% stake in DRealty, leaving the company with a current free float of only 15%.
“There seems to be some ‘Johor’s interests’ involved here … in that even in disposing of its non-core businesses, J-Corp seems to want to ensure that the businesses would remain in the hands of Johor-based businessmen,” says a market observer.
DRealty’s business operations include property development; provision of technical services for the healthcare sector and integrated facilities management services for the property sector; car park operations which provide steady cashflow; and cleaning and hygiene services.
For the nine months ended Sept 30, 2013, DRealty registered a net profit of RM10.34mil, compared with a net loss of RM636,000 in the previous corresponding period. Consequently, DRealty posted earnings per share of 3.34 sen, compared with a loss per share of 0.25 sen.
Group revenue for the nine months of 2013, however, was lower at RM136.5mil, compared with RM149.28mil previously.