ANYTHING TO DO WITH KHOO’S US$80MIL DIVORCE? WHAT’S GOING ON IN MUI?

MALAYAN United Industries Bhd (MUI) hogged the limelight this week with its stock surging over 47% while the broader market was largely listless.

The flagship of one-time corporate high-flyer Tan Sri Khoo Kay Peng, the daily trading volume of MUI’s stock has ballooned from just over 200,000 shares at the beginning of the month to about 200 million shares this week.

It last closed at 24.5 sen.

So, why the spike in interest?

While official queries to the company have gone unanswered, speculation is rife that the 78-year-old Khoo who controls UK brand Laura Ashley and a string of Corus hotels in Malaysia and abroad could finally be unlocking the value of some of the diversified group’s assets.

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Prized property: Should Corus Hotel be redeveloped, experts estimate gross development value to be RM2bil.

Prized property: Should Corus Hotel be redeveloped, experts estimate gross development value to be RM2bil.

It cannot be ascertained if there are other corporate developments brewing at this point at the company although there are also whispers of a possible change of guards, if Khoo decides to sell off his controlling stake in the firm.

These follow a UK court order made earlier this month requiring Khoo to pay his ex-wife £64mil (RM355mil) as part of a highly-publicised divorce settlement.

From a fundamental point of view, MUI is asset-rich but remains loss-making as a group.

Laura Ashley and Corus hotels

Among its crown jewels, London-listed Laura Ashley Holdings plc which Khoo controls just under 50% of, is one of MUI’s most prized assets.

Laura Ashley, known for its floral dresses and English-style home furnishings operates 194 owned-stores in UK, the Republic of Ireland and France as well as 252 franchised stores globally.

Apart from Laura Ashley which falls under MUI’s retailing division which also happens to be its largest revenue generator, MUI has another Malaysian entity namely Metrojaya Bhd.

Metrojaya operates seven department stores and 61 speciality stores in Malaysia under various in-house brands such as Reject Shop, East India and Somerset Bay, according to the group’s latest annual report.

Under its hotel division, MUI owns and operates 10 hotels in the UK and two hotels in Malaysia under the Corus and Laura Ashley brands.

The Laura Ashley brand hotels are primarily boutique hotels that display Laura Ashley’s range of products and designs. All of MUI’s hotels are understood to be revenue-generating.

In the UK, for instance, its flagship hotel known as the Corus Hotel Hyde, recorded revenue of £16.8mil for the 18-month financial period ended June 30,2016 compared with £13.2mil for the previous financial year.

This hotel sits on 21,640 sq ft of freehold land and carries a current net book value (NBV) of only RM257.5mil. MUI bought the property in 2001. It is unclear when was the last time this piece of land was revalued.

In Malaysia, MUI owns and operates Hotel Corus Kuala Lumpur and the Corus Paradise Resort Port Dickson.

MUI’s Corus Hotel in Jalan Ampang sits on a 78,500 sq ft plot of land and is situated opposite the Petronas Twin Towers. It is carried at a current NBV of RM60.5mil, or RM770 per sq ft.

Parcels of land in the same vicinity meanwhile have managed to command prices as high as RM3,000 per sq ft.

Should the Corus Hotel in Jalan Ampang be redeveloped, it has been estimated by experts that it could fetch a gross development value of close to RM2bil.

MUI also has a property division whereby its flagship project is the 1990-acre Bandar Springhill township development in Port Dickson.

Financial position

Besides these, it has a food division via Network Foods International Ltd which is involved in the manufacturing and marketing of chocolates and other confectionery while a financial services division made up of stockbroking firm PM Securities Bhd and PCB Asset Management Sdn Bhd rounds up its current operations.

Based on the company’s latest financial notes, MUI’s total assets are collectively worth some RM2.10bil of which RM338.5mil comprises deposits, bank balances and cash.

Its borrowings meanwhile stand at about RM209mil, according to the latest quarterly report.

Unlocking assets: Is Khoo unlocking the value of some of the diversified group’s assets?

Unlocking assets: Is Khoo unlocking the value of some of the diversified group’s assets?

In his recent statement to shareholders, Khoo says the group will adopt a “prudent yet progressive approach in developing strategies and managing its various businesses locally and abroad”.

In the same statement, Khoo also mentions that the group will “endeavour to streamline its portfolio of assets and businesses to further enhance its financial position.”

Recall, in 2015, there was a proposed sale of MUI’s 69.12% stake in Pan Malaysia Holdings (of which PM Securities comes under) for RM77.12mil to Datuk Dr Yu Kuan Chon, the major shareholder of YNH Property Bhd.

That deal however was terminated last September.

MUI said then that “the proposed RM77.12mil sale was cancelled due to the non-fulfillment of a condition precedent for the deal by the cut-off date of Sept 12.”

For MUI, the disposal was supposed to be its first major divestment of a listed company under the group since it undertook a massive clean-up to restructure the group after the 1997/98 Asian Financial Crisis.

By becoming a leaner outfit, MUI should be able to be on the right track to regain its footing and return to the black, observers say.

It is believed that Yu, known for his savvy investing skills had at one point been taking up small stakes in the MUI group. It cannot be confirmed whether he has been buying in during the stock’s recent rally.

Heydays

In the 1980s also its heydays, the MUI group had up to seven companies listed on the local stock exchange and several more listed abroad.

Loved and chased by retailers, it’s been said that many were willing to fork up more than RM20 for one MUI share then. That had caused its market capitalisation to balloon to above RM1bil in 1981 from less than RM10mil just five years earlier.

Then came the Asian financial crisis and the stock alongside many of the other favourites of punters fell out of favour.

“The MUI we have today has assets but not much has been done to unlock value.

“It also remains unattractive in terms of profits,” an observer points out.

A complicated shareholding structure of its listed companies and what some describe as Khoo’s lack of accessibility to investors also add to its woes.

Meanwhile, is the recent excitement surrounding the company’s stock sending out a signal that something’s about to change or will the interest fizzle out eventually ?

Only time will tell.

– ANN