Question of price in Ranhill privatisation

AFTER years of speculation, the privatisation of construction and engineering firm Ranhill Bhd was announced earlier this week without much fanfare.

Industry observers are divided on whether the price offered for the company, at 90 sen per share is “right” for minority shareholders.

The Minority Shareholder Watchdog Group (MSWG), for one says it is “not satisfactory”.

Although the offer price incorporates a premium of 15.5 sen or 21% over 74.5 sen, which was the price it had last traded at prior to the takeover announcement, its CEO Rita Benoy Bushon points out that it is at a 28% discount to the group's net assets per share of RM1.25 as at March 31, 2011.

“Furthermore, the controlling major shareholder also Ranhill president and chief executive officer Tan Sri Hamdan Mohamad is the one making the offer; to me, he has not ensured the (good) performance of the company, going by its recent financial results and now, he wants to buy it out,” she tells StarBizWeek.

As a champion of minority rights, Rita says other offer bids should be allowed to come in, giving minorities an opportunity to exit the company at possibly a “better price”.

Still, an analyst at a bank-backed brokerage says given the current volatility of global stock markets including the local mart, now was a good time as any to accept the offer and part with the stock.

“Besides, Ranhill's recent financial performance has not been particularly encouraging,” he remarks.

Yet another one agrees pointing out that Ranhill is involved in certain “volatile” industries like the construction industry and advises minorities to accept the offer now.

Officials at Ranhill were contacted but no comment was made available.

The company in its latest quarter, reported a lower net profit of RM10.01mil against a net profit of RM13.7mil last year largely due to lower contributions by its different business segments and some foreign exchange losses.

Ranhill saw its net profit slump 93.2% in FY10 to RM15.3mil from RM228.3mil in FY09, while revenue dropped 5% to RM2.1bil from RM2.2bil. Earnings per share fell to 2.57 sen in FY10 from 38.23 sen the year before despite a steady flow of jobs locally and overseas.

Earlier, in its announcement to the stock exchange, Ranhill had said that its board was not seeking an alternative bid for the buyout of the firm.

Hamdan together with his joint offerors who currently hold a 51.86% direct stake in Ranhill had on Monday made an offer to acquire the remaining shares that they did not own in the firm for 90 sen a share or RM259mil in total.

Ranhill which operations can be categorised into four distinct areas namely environment, power, infrastructure and petroleum and chemical counts among its assets, independent power producer Ranhill Powertron Sdn Bhd that operates a 190MW combined-cycle, gas-turbine power plant in Kota Kinabalu, Sabah, water treatments assets including SAJ Holdings Sdn Bhd as well as the Senai-Pasir Gudang-Desaru Expressway.

Ranhill is also working on a US$1.2bil contract from the Libyan Government's Housing and Infrastructure Board for the design, construction and handover of 10,680 units of residential apartments in Tajura, a suburb in east Tripoli, covering an area of 752ha which is bordered at the north by the main east-to-west coastal highway.

The project is expected to be completed by 2013, according to Ranhill's 2010 annual report.

Sources said assuming the takeover deal goes through it will need 90% approval from shareholders who hold the remaining 41.84% in the company for this to happen the plan is to de-list the company from the stock exchange but eventually re-list it again once some streamlining of the company's operations is completed although what this will involve, is not clear at this stage.

Three years ago , Hamdan said Ranhill Utilities, a 70% unit of Ranhill was privatised because it was undervalued.

Earlier in the year, Standard & Poor's Ratings Services had lowered its long-term corporate credit rating on Ranhill to B- from B, largely due to its weak liquidity and exposure in the political instability in Libya.

The ratings service company withdrew the B- rating two months ago after the company had re-financed its debts.

At the close yesterday, Ranhill shares finished higher by half a sen to 88.5 sen.

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