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MMC CORP: Plans to list Gas Malaysia Bhd and to also re-list Malakoff Bhd and Johor Port Bhd with an estimated combined valuation of RM14 billion. MMC’s minorities might be advised to watch for developments on these IPOs, since there are concerns that the valuations might be too optimistic and MMC might lose some of its lustre as a holding company if these valuable assets are sold into the public market.  From a valuation standpoint, Malakoff has not expanded its generation capacity since privatisation in 2007, while Gas Malaysia and Johor Port are essentially domestic plays without exponential growth prospects. This all gives rise to concern that an IPO of all three companies might not receive a stellar response.

MSWG’s Comment: The plan to list/relist the 3 companies under the umbrella of MMC seems positive at this point in time, as the latter is able to unlock these valuable assets. It may be argued, however, that some of the companies may not have attained sufficient growth to fully realize all the benefits of an IPO. Notwithstanding, the unlocking of value in these assets certainly will accrue benefits to MMC and, depending on the public shareholding spread, the IPO will provide liquidity to the shares in these companies and henceforth further potential in price appreciation of their shares. This will ultimately benefit MMC too. Of course, the extent of the benefit accruing to MMC would also depend on the offer prices set for the IPOs and eventually the market capitalisation. With the listing/relisting, MMC will continue to be a holding company owning sizeable equity stakes in these companies and will thus continue to enjoy their growth. Furthermore, there is good growth for Gas Malaysia especially with high demand for gas by consumers. It is also a nice dividend stock due to its strong steady cash flows. In the case of Malakoff, there is also the potential to source for IPP projects overseas.

Who is MSWG?

The Minority Shareholder Watchdog Group (MSWG) was established as a government initiative in the year 2000 as part of a broader capital market framework to protect the interests of minority shareholders through shareholder activism. It is one avenue of market discipline to encourage good governance amongst public listed companies with the objective of raising shareholder value over time.

MSWG’s four founding organisations, which have been members since inception, include::

  1. Armed Forces Fund Board (Lembaga Tabung Angkatan Tentera)
  2. National Equity Corporation (Permodalan Nasional Berhad)
  3. Social Security Organisation (Pertubuhan Keselamatan Sosial)
  4. Pilgrimage Board (Lembaga Tabung Haji)

The founding members provided funding for MSWG’s start-up and establishment as a permanent organisation with high profile activities. Currently, MSWG is substantially funded by the Capital Market Development Fund, an initiative of , as well as through sales of its own products and services.

Source: MSWG Newsletter – 1 June 2011