The ghost waves over Tebrau Teguh

The shares of Tebrau Teguh, the company linked to ghost stories from Johor lately, were suspended by Bursa Malaysia yesterday pending an important announcement.

It turns out that state-owned Kumpulan Prasarana Rakyat Johor (KPRJ) made a mandatory general offer (MGO) for Tebrau Teguh shares. KPRJ already owned 41.5% in Tebrau Teguh.

This blog had disclosed last week that Dato Lim Kam Hoo had interest to increase his equity holding in Tebrau Teguh and be a more strategic player in the state-company, KPRJ and the Johor property game.

Tebrau Teguh is believed to be the vehicle to acquire state land and flip over to another party for quick buck. How does this turn of event help or give way to Lim Kam Hoo to be a substantial shareholders in Tebrau Teguh?

Let's read The Star report today and commment as we go along:

KPRJ said to launch mandatory general offer for Tebrau Teguh

The Star
Tuesday January 31, 2012

PETALING JAYA: Tebrau Teguh Bhd, which has suspended its shares from trading, may be the next company to undergo privatisation by its major shareholder.

Sources said its major shareholder Kumpulan Prasarana Rakyat Johor (KPRJ) would be carrying out a mandatory general offer for the company.

KPRJ owns 41.15% of Tebrau Teguh.

Tebrau Teguh is a diversified property developer and construction group linked with KPRJ.

KPRJ itself is the Johor state's investment arm.

Tebrau Teguh's shares closed last Friday at 75 sen.

The volume traded last Friday was 12.8 million shares compared with 1.8 million shares the previous Friday.

The 596.39% increase in volume of shares traded could have been due to sentiments on the material announcement.

The most important point to be highlighted in this part of the report is that Tebrau Teguh is going private.

This has been the trend in corporate moves these days. It is usually to avoid the bad publicity that comes with public disclosure, thus useful to keep sensitive information under lid from the easily excitable public.

KPRJ will need to spend money to buy shares from the public till they become the majority shareholder of more than 51%.

But, they have also commitments, like building 200 schools, etc.

Will it keep all the shares it bought from the market or will they sell it to other existing shareholders? Mind you, as sendirian berhad company, the first rights of refusal will be to offer to other existing shareholders.

Now another interesting twist to the report:

A business weekly had reported over the weekend that Danga Bay Sdn Bhd (DBSB) might be acquired by Tebrau Teguh.

DBSB was the custodian of a privatisation contract awarded by the Johor state government in 2000 to develop 1,800 acres of waterfront land along Johor Bahru's Lido Beach. It is therefore the master developer of the Danga Bay waterfront project in Johor.

Should Danga Bay be acquired, Tebrau Teguh would be the biggest owner and developer of sea-fronting projects.

Both KPRJ and Credence Resources Bhd currently own DBSB with 30% and 70% stakes respectively.

Once the acquisition is complete, KPRJ will still remain the majority shareholder of Tebrau Teguh.

The second majority shareholder will be Lim Kang Hoo as he owns 70% of DBSB via Credence Resources.

Presumably, this over-the-weekend report would not have known of the impending MGO. It could be rumours leaked to prop-up interest in the shares on Monday before being suspended.

The report did not say the subsequent equity of KPRJ and Lim Kang Hoo after the property injection. It will take quite a bit of work to figure out the subsequent equity with the MGO taken into account.

Nevertheless, it shows that via property injection the shareholding structure could change. If Tebrau Teguh was to acquire a high valued property in which KPRJ's equity is minimal or nil, KPRJ's final equity in Tebrau Teguh could be reduced.

The rest of the report are merely background information on Tebrau Teguh:

It is also worth noting that Lim is also Ekovest Bhd's co-founder and chairman.

Tebrau Teguh has completed projects through one of its subsidiaries, Bayou Bay Development Sdn Bhd.

It has completed projects involving mainly medium cost apartment and townhouses which are the Oasis Apartment, and the three phases of Bayu Puteri Residences.

Its future developments are Desa Idaman Bungalow and The Oxcy service apartment.

Through its other subsidiary Tebrau Bay Constructions Sdn Bhd, Tebrau Teguh has completed several projects, namely an RM80mil project with the National Housing Department to build 1,500 unit s of government housing apartments in Johor.

The project was completed in early 2007.

Tebrau Bay Constructions is currently in the process of developing 2,700 units of low-cost apartments in the Johor Baru township.

Ignore these projeccts. It is mere formality to fill in the profile of Tebrau Teguh.

As told before here, state controlled Tebrau Teguh will eventually come under control of Lim Hang Hoo. All it takes is a single wave of hand by the ghost.

But the intention is to have the Government inject the strategically located and sufficiently sized state lands into Tebrau Teguh to flip (or for a quick sale) to others.

The likelihood is to have the land injection excercise at a time KPRJ has majority control of Tebrau Teguh. It looks justified for state land to be injected into state controlled company. But at what price?

The suspicion would be at a nomimal price. Why should state inject state land into state company at full value?

Syyy ... please no mention of those minority shareholders. Otherwise, there will be public outcry of selling land at nominal value to companies not wholly owned subsidiary of state but with the existence of other shareholders.

Then suddenly, the ghost wave his hand again and KPRJ is directed to quitely sell their shares at a price without marking the land value to market. The probable reason that can be used is KPRJ need money for it's public infrastructure program.

Since Tebrau teguh is not a public listed company, no announcement is necessary.

The land parcels can be flipped over elsewhere for a tidy profit. The ghost will make sure the public do not know. If the public got to know, it will be the politicians, civil servants and professionals that get blamed by the rakyat.

The ghost and Lim Kam Hoo make their billions.