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M'sian investment firm eyes stake in Cambodian power plant

Publication Date : 24-02-2014

 

Malaysia-based investment firm GUH Holdings Bhd is poised to take the plunge in the power generation sector by acquiring a substantial stake in Leader Universal Holdings Bhd’s 100-megawatt (MW) coal-fired power plant in Cambodia.

The plant, built at the cost of US$340 million, is already in the early stages of commercial operations and due for an official launch today in Cambodia.

As GUH and Leader Universal have common shareholders, sources said negotiations were carried out carefully to ensure that the interests of the minorities were not compromised.

“They are still negotiating but assuming that GUH purchases at least a 20% stake, it will cost the company more than 250 million ringgit ($75 million),” said a source.

It is estimated that the purchase can potentially add at least 20 million ringgit per annum to the bottom line of GUH in the immediate term and the numbers will grow. The coal-fired power plant has a 30-year concession.

Based on its net profit for the financial year ended Dec 31, 2013 (FY13), which stood at 30 million ringgit, the new source of income could boost its recurring earnings significantly.

If the deal materialises, this will be GUH’s second foray into the power generation business in Cambodia. It already has a 20% stake in a 37.1MW diesel-fired power plant in Cambodia which concession is due to expire in 2015.

It is learnt that the company is in the midst of a discussion for an extension of the concession, in which Leader Universal has a 60% share.

The major shareholders of GUH and Leader Universal are the H’ng family that is based in Penang.

The family privatised Leader Universal, which is a leading cable manufacturer in the country, two years ago.

After the privatisation, GUH is the only listed vehicle for the family. GUH’s core business is the production of printed circuit boards where it has operations in Penang and China.

The plants are currently undergoing expansion to cater for the increasing demand.

GUH depends on property development to bring in about 25% of its earnings. It has a large parcel of land in Seremban that is valued in its books at less than 5 ringgit per sq ft but the market price is some 40 ringgit to 50 ringgit per sq ft based on latest transactions in the area.

The land in Taman Bukit Kepayang is currently being developed with a gross development value of 1.2 billion ringgit and work on the project is expected to go on for another six years, according sources.

For future expansion, GUH is currenty exploring opportunities to pick up strategic land bank nearer towards the city in the Klang Valley and Penang.

Its group managing director Kenneth H’ng declined to comment when contacted.

GUH has a fairly clean balance sheet supported by cash and cash equivalent of 183.3 million ringgit without much liabilities.

The cash backing per share is 63 sen while the market price is 1.25 ringgit. It recorded a profit of 30.6 million ringgit on the back of a turnover of 286.6 million ringgit in FY13. In 2012, the net profit was 36.2 million on the back of revenue of 280.4 million ringgit.

The operating cashflow before working capital changes is 35.6 million ringgit for the period.

The company has been buying back its shares, which is not surprising considering its net asset per share is 1.82 ringgit.

According to filings with Bursa, it anticipated slower growth in the property segment due to tightening credit and stricter lending criteria.

However, it expected higher contribution from the improvements from its plantation, water and wastewater treatment, electrical and electronic divisions this year.

The plantation is a small oil palm estate of 385 acres in Kedah with an average age of trees of seven years.

*US$1 = 3.29 ringgit

 

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