Frankly Speaking

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Proton MBO complicates mattersA management buyout (MBO) is not necessarily a bad thing. It is a sure way for management to send a signal to the major shareholders that they have the confidence and ability to manage and finance the buyout of the company.

But in the case of Proton Holdings Bhd, talk of a MBO at a time when the major shareholder, Khazanah Nasional Bhd, is under pressure to divest a portion of its stake is not necessarily a good thing. In fact, it complicates matters.

A question that crops up is, what is the management’s priority? Is it to ensure that stakeholders such as Khazanah get the best returns for their investments irrespective of the uncertainty of owning a stake in the company?

And what happens if the shareholders decide not to give any equity stake to management but instead give it to a third party? Would management cooperate in ensuring that the deal is successfully transacted?

In the case of Proton, perhaps talk of a possible MBO will stave off the predators. In fact, there is already a proposal by DRB-Hicom for a stake of up to 32% in Proton.

Such a transaction, if approved, will be bad for Khazanah. How can a strategic investor such as DRB-Hicom help Khazanah recoup maximum value for its remaining interest in Proton?

Most people will agree with the view that Khazanah should reduce its stake in companies such as Proton. But then, the valuation has to be right. Khazanah should not be forced to accept any offer that falls short of its expectations.

Until somebody is prepared to put real big money on the table, it is best for all to stop talking about taking over Proton because it merely complicates matters.

Talking medical tourismMedical travel in Malaysia is expected to grow at a compound annual growth rate (CAGR) of 23% from 2009 to 2012, according to one report, with some 75% of visitors coming from the Asean region. With this level of growth on the cards, it is no surprise that the impressive facilities that healthcare centres here have installed are attracting interest from clients looking for access to high-quality medical services.

At a healthcare conference here last week, one agent who flies patients from conflict zones in Asia to medical centres in the Middle East and Southeast Asia asked a speaker from a premium medical centre whether he could bring in patients overnight without worrying about visas and red tape. Thankfully, the medical centre concerned could assure the agent that it had a unit specifically for that purpose. “All it takes is one phone call to get the paperwork done,” said the centre’s CEO.

Unfortunately, not everyone in the field is similarly tuned in. As an industry analyst says, “Malaysia is playing catch-up with Singapore and Thailand in this business”. He spoke of another medical centre that received  a phone inquiry from an interested overseas party but lost it after the potential client was passed to and fro between doctors and administrator.

And then there are the authorities, which have been circumnavigating the idea of developing healthcare tourism since the 1990s. At long last, a healthcare tourism council is due to be launched by the end of the year. “Hopefully,” said a consultant, “it will not be engaging in just more talk.”

No need to list PetronasLet us not fall for the pitch by investment bankers that suggests the listing of Petroliam Nasional Bhd (Petronas), or any of its units, would wake the local stock market from its coma.

The listing of mega corporations such as Maxis Bhd, or any part of Petronas, may excite the market for a short while by luring foreign investors, but this is hardly a long-term solution.

And how many more “Maxis” or “Petronas”-type companies can we list to boost the local stock market whenever foreign interest wanes again?

Of course, we have no business saying that Maxis should or should not be relisted, as it is a commercial decision concerning its private owners. But Petronas, being the state oil company, is a different story.

Unless there are solid grounds to list Petronas — meaning that there are many more pros than cons — the government shouldn’t consider such proposals hastily.

No one knows whether such exercises can actually make our stock market more attractive, but one thing is certain — investment bankers tend to reap millions in advisory, placement or underwriting fees.

In fact, it is not entirely true to say that local stocks don’t attract much trading activity because they are unattractive.

One just has to look at the listed glove manufacturers,  plantation companies and oil and gas players. These are the sectors and companies that have managed to attract foreign investors due to their niche offerings in the regional stock market and their promising prospects.

Needless to say, some government-linked companies that lack future growth prospects, and in which shareholdings and management are still tightly controlled by government institutions, are lagging.

Because of their large size, this is the bunch that has contributed to the rather dull performance of the FBM KLCI.

So, before we talk about listing Petronas, we should put more effort into re-energising the GLCs, as a priority, to attract more interest to the local bourse.

This article appeared in The Edge Malaysia, Issue 777, Oct 19-25, 2009.