UEM Group Bhd, an infrastructure and services conglomerate, is working with financial advisers on the potential sale of Cement Industries of Malaysia Bhd, said the people, who asked not to be identified as the process is private. UEM is seeking a valuation of about RM1 billion (US$230 million) for CIMA, as the cement maker is known, and companies in the industry have shown interest, the people said.
Deliberations are at an early stage and UEM Group could decide not to proceed with the divestment, the people said. A representative for UEM Group declined to comment.
Founded in 1975, CIMA sells cement and ready-mixed concrete, and has been involved in iconic projects in Malaysia ranging from expressways to bridges and railroads, its website shows. The company was taken private and delisted from the Bursa Malaysia exchange in 2008 by UEM, according to a stock exchange filing.
UEM Group started as a construction company and evolved into a conglomerate focused on expressways, township and property development, engineering and construction, and asset and facility management, its website shows.
DrLawrenceOng
CIMA is in the cement industry. It is a strategic sector for Khazanah to be in.
Khazanah's objective is to "deliver sustainable economic and societal values for the nation". And as a strategic investor, it strives to "balance between growing long-term financial returns and being a responsible organisation so future generations of Malaysians can benefit from what we do today.". Therefore, Khazanah should not dispose CIMA.
The cement market is already dominated by YTL with about 55-60% market share. By having CIMA, Khazanah can ensure that cement supply is not controlled by any one party. CIMA has hundreds to a thousand employees with Malay Bumiputera forming a big proportion of this.
So, through any angle, CIMA is indeed a strategic investment for Khazanah and for the country. If CIMA is sold, Khazanah will lose the control of the cement market, which is already facing price increases affecting the construction sector leading to increase in construction costs and property prices. This will make it even harder for the people to own their own houses.
Rather, Khazanah should improve on the management of CIMA. Review the current management team at CIMA. Do we have the right team to take such a business to greater heights? Does the management team has the right skill sets to fight in such a tough market? From the MD to the rest of the top management team, everyone has to have the mettle to survive in this market.
And to be that, one has to have the right background and experience in the cement, and by extension, the concrete market. Look at the management team of YTL and the other cement players. Who do they have leading their companies? How does CIMA's management team match up to them? That itself will be a great mirror to reflect on.
Selling CIMA is the easy way out.
2023-03-04 21:27