Bird Palace - An Investment Club with Friends!
Short Position
Mark T Bird
Publish date: Sat, 24 Mar 2018, 09:46 AM
Maybank’s hidden value
THE sterling set of results announced by Etiqa Group Insurance & Takaful recently makes it candidate for a corporate exercise.
The Islamic insurance arm that is owned by Malayan Banking Bhd, registered a profit before tax of RM1.01bil on a gross premium contribution of RM6.2bil in 2017. The margin of almost 20% makes it stronger than the existing listed Islamic insurer such as Syarikat Takaful Malaysia Bhd
Syarikat Takaful, which has a market capitalisation of RM2.7bil, registered a net profit of RM206.7mil on a turnover of RM2.14bil last year.
There is another Islamic insurance company, Takaful Iklas, which is under MNRB Holdings Bhd, another company under PNB. According to MNRB’s quarterly results, its takaful business generated RM32mil in profit against a gross premium of RM763mil for the nine months until December 2017.
The result clearly shows Etiqa in a leading position when it comes to Islamic insurance. Etiqa’s thriving business is probably due to it being part of the Maybank group that provides the insurance company with a captive market.Nevertheless, its value is hidden in the current structure as part of the larger Maybank group.
A listing of Etiqa could possible give rise to a vehicle with a market capitalisation of more than RM15bil, considering the value Syarikat Takaful commands in the market.
Better still, if Etiqa takes over Takaful Iklas from MNRB or the entire listing status of the latter. It would be well positioned as a commendable local insurance company and one that offers opportunities for Islamic funds to put their money.
It has been speculated in the past that Etiqa could possibly be listed as a separate entity. Perhaps it is something that would happen since PNB has seen several corporate moves under the leadership of Tan Sri Abdul Wahid Omar.
Waiting game
PRINCE Court Medical Centre (PCMC) is a top hospital with a hotel-like feel that was set up by Petronas.
Operating costs were naturally high and over the years losses mounted. With accumulated losses reportedly past RM1bil, the hospital was put up for sale and on Thursday, Khazanah Nasional Bhd paid an undisclosed amount to take over the hospital.
Concurrently, Khazanah inked a collaboration agreement with IHH Healthcare Bhd for shared services support and operational improvement initiatives at PCMC. IHH is 41% owned by Khazanah and will be given the right of first offer to acquire PCMC during a pre-agreed period.
The deal is multiple in some ways. For Khazanah, buying PCMC allows it to rehabilitate the asset towards profitability and do so without the piercing eyes of the investment community. PCMC is a 270-bed hospital in a business and industry that has a growth trajectory a lot of businesses will envy. The hospital with its specialists and reputation is one that will add to the portfolio of hospitals under IHH should it decide to go ahead and buy the hospital.
Keeping it under Khazanah also helps with IHH’s financials. The loss-making operations of PCMC would be a drag on IHH and for a stock that is on the global radar of investors, that decision would have been detrimental to the share price performance of IHH.
The simple fact is that the healthcare business in Malaysia is growing. Columbia Asia Group has just received additional equity investment of US$210mil (RM820mil) to build new hospitals and deepen the level of specialty care in existing facilities.
That is apart from the expansion plans that other hospital groups in the country are undertaking.
IHH by entering into a collaboration agreement with Khazanah is still expected to make money from the hospital. It is expected to gain from management fees given to PCMC and that will allow itself to see that contribution be accretive to earnings until a time it decides to buy the hospital outright.
Global turmoil
THE tariffs imposed by the United States and China on goods being traded between both countries is something most people have been expecting but dreading.
The US decided to impose tariff duties on US$60bil worth of imports from China and China retaliated by slapping extra tariffs on US$3bil worth of goods brought into the country.
The action by both countries slammed stock markets yesterday. History has shown that a trade war is a lose-lose situation for countries engaged in such destructive activities and by estimates, it will shave global growth into the foreseeable future.
That amount is, however, small. Just a minuscule percentage will be lost by both the US and China but the worry is reciprocative action that follows. Should the US and China deepen the tariff and duties impose on goods shipped between both countries, then that will have a lingering and possibly longer-lasting impact on global trade.
Corporations that facilitate global trade no longer operate in isolation. Supply chains are deep and throughout the world and punitive action by either and both countries will have a ripple effect in many other countries.
Malaysia can just be a spectator to all of this. Given the openness of the economy, action by both sides will eventually effect business in Malaysia. As it stands, Malaysia will be hit by the higher tariffs on solar panels as Malaysia is among the largest exporters of such goods in the world.
The other worry is the knock-on effect that will happen if the list of goods is expanded into other areas. The US has already voiced its dissatisfaction over the trade imbalance between both countries.
But any trade wars also does not serve the US. Growth will be affected and with jobs the priority for every single government, lasting trade wars will not only chip away at domestic growth and also jobs, and that will be to the detriment of any country and government.
StarBiz
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Ride The Bull Short The Bear
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This book is the result of the author's many years of experience and observation throughout his 26 years in the stockbroking industry. It was written for general public to learn to invest based on facts and not on fantasies or hearsay....
TESSA
Interesting!
Merci infiniment :)
2018-03-24 15:11