Petronas To Put Bursa Back On The Radar

Petronas is Malaysia's premier state-owned company, but as a publicly owned company it could be worth more than $200 billion and would dominate the country's stockmarket.

According to Deutsche Bank, Petronas could potentially make up 40% of Malaysia's weighting in the MSCI Asia ex-Japan index if it was to list in its entirety (MSCI is a free float-adjusted market capitalisation index that is designed to measure the equity market performance of countries in the region).

Based on a price-to-earnings ratio of 15 times, Petronas could be worth up to $207 billion, according to Investment and Pensions Europe. This would make Malaysia's largest state-owned company close to the same size as the country's total equity market capitalisation today, almost doubling the total market size to $464 billion from $257 billion.

Publicly listing more of Petronas's operations, say analysts and market participants, is critical to stimulating greater growth in the markets. According to Deutsche, if the government were to release a proposed 25% of its equity share, it could potentially bring Malaysia's weighting back on par with Singapore, which currently accounts for 6.6% of the MSCI Asia ex-Japan index. It would also put the country ahead of its biggest regional competitors, such as Indonesia, Thailand and the Philippines. Malaysia currently holds a weighting of 3.8%, but the addition of more Petronas shares to the market could raise this to 6.4%.

To put this into another context, if the government chose to only release a further 20% of its equity interest in the company's downstream operations, such as its LNG [liquid natural gas] and refinery businesses, it could result in an increase to $191 billion from $79 billion of Malaysia's MSCI weighting.

Petronas's total listed assets on Bursa Malaysia currently have a total market capitalisation of $5.62 billion. Within the holdings group, the companies that have been listed are MISC, Petronas Dagangan, Petronas Gas and KLCC Property Holdings.

In April this year, MISC, which is a key subsidiary and specialist in global marine transportation and logistics services, hired J.P. Morgan, Maybank and Credit Suisse for the listing of its marine engineering unit Malaysia Marine and Heavy Engineering (MMHE). Its IPO is now scheduled to take place in September. This follows a $1.5 billion rights issue for MISC in February, arranged by RHB Capital. A market capitalisation of about M$7 billion ($2.2 billion) is expected for MMHE, assuming a net profit of M$350 million and the company being listed at a price-to-earnings ratio of 21 times, according to analysts.

The announcement to list MMHE came as a surprise to some analysts. OSK Research, for example, had expected Petronas to list parts of its petrochemicals business instead, specifically Petronas Carigali and Malaysia LNG. OSK Research had calculated that the market capitalisation of Petronas's petrochemicals companies would be about M$50 billion ($15.1 billion). This is based on a 2009 net profit of M$5 billion for these two companies and the assumption that the shares would be listed at a price-to-earnings ratio of 10 times. Within the petrochemicals sector, a M$50 billion market cap dwarfs the local peers.

While the listing of MMHE is good news, from the analysts' perspective there is much more value for Petronas and the market if it was to list its more profitable downstream operations, such as the petrochemicals, LNG and refinery businesses. A partial listing of this nature would push Malaysia's Asia ex-Japan MSCI market capitalisation to $123 billion and the country's weighting to 5.95%.

Investors and analysts are pushing for such a listing because a move to further publicly list parts of its operations could result in other Malaysia-based companies following suit.

Staying competitive

According to Dealogic figures, the Malaysian primary equity market reached its zenith in 2002 when it raised $1.65 billion. By 2008, this volume had dropped drastically to $174 million. If you look at other signposts, such as foreign direct investment (FDI), the nation is falling behind its peers. AmResearch estimates that 35.4% of FDI flows into Southeast Asia went to Malaysia in 1980, while less than 1% went to Vietnam. By 2008, both countries attracted about $8 billion in FDI each.

However, with the roll-out of the so-called New Economic Model and a commitment by Malaysian Prime Minister Najib Tun Razak to lift the country from a middle-income to a high-income economy by 2020, the markets appear to be on the mend.

Many of the government incentives are aimed at attracting FDI. Previously, if a company was to list on the Bursa Malaysia, only a maximum of 40% could be held by foreign investors. Now, in certain sectors, foreigners can own as much as 70%. Plus, non-Malaysian investors can own 100% of a commercial property asset, if it is bought from a non-Bumiputra controlled entity.

Simply, reforms like this not only expand the investor pool but also potentially attract a more seasoned investor-base into the country.

This article was first published in the June 2010 issue of FinanceAsia magazine.

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Great Malaysian CEOs Part 2

Well, I got a lot of feedback on the CEO issue following my mentioning of Nazir Razak. There have been naysayers who reminded me that the family name and connections played a significant part. I have to say that there are plenty of people who got to the top with just connections and by having the right family name - but the crux is what do you with it.

I have extended the list, its not just GLCs CEOs, but after surveying the CEOs of listed companies in the country, these 4 would be part of the top 5. Hassan Merican would have easily made the list as well but let's just look at the current crop.

Datuk Shamsul Azhar Abbas

was formerly the President / Chief Executive Officer of MISC Berhad and just recently appointed to the top post of Petronas. I can tell you that a lot of observers breathed a sigh of deep relief when his appointment was confirmed as the stewardship of Petronas assets was at stake.

Shamsul holds a degree in Political Science from Science University of Malaysia, a Masters of Science Degree (MSc.) in Energy Management from University of Pennsylvania, USA and a Technical Diploma in Petroleum Economics from Institute Francaise du Petrole (IFP), France. He joined PETRONAS in 1975 and has held various senior management positions in PETRONAS including Vice President, Petrochemical Business, Vice President, Oil Business, Vice President, Exploration and Production Business and Vice President, Logistics & Maritime Business. On 1 July 2004, he was appointed as the Managing Director/Chief Executive Officer of MISC.

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Jamaludin Bin Ibrahim

Jamaludin Ibrahim joined Axiata Group Berhad (formerly known as TM International Berhad) on March 2008 as the President and Group Chief Executive Officer. He is also a board member of Axiata Group. Prior to that, Jamaludin was with Maxis Communications Berhad, which he joined in 1997 and was appointed Chief Operating Officer in the same year, and Chief Executive Officer in 1998. In 2006, he was redesignated the Group Chief Executive Officer to reflect Maxis’ international footprint. He retired from Maxis in July 2007 but remained as a Board member till February 2008.

During Jamaludin’s decade of leadership with Maxis, the company’s revenue grew more than twenty-fold to about USD2.3 billion, net profit grew to about USD600 million and market capitalisation swelled to more than USD11 billion in 2007 (before the privatisation).

Before joining Maxis, he spent 16 years in the IT Industry. He was Managing Director and CEO of Digital Equipment Malaysia (a Malaysian branch of Digital Equipment, then the second largest IT Company worldwide) from 1993 to 1997. Jamaludin also spent 12 years in IBM (1981-93), the first five years as Systems Engineer and then in various positions in Sales, Marketing Support and Management. Prior to IBM, he was a lecturer in Quantitative Methods at California State University, United States in 1980. Jamaludin graduated from California State University in 1978 with a B.Sc. in Business Administration and minor in Mathematics. He obtained his MBA from Portland State University, Oregon in 1980.

Jamaludin is the Chairman of Celcom Axiata Berhad (formerly known as Celcom (Malaysia) Berhad), the second largest mobile company in Malaysia, and sits on the board of PT XL Axiata Tbk (XL) Indonesia, MobileOne Ltd (M1) Singapore, as well as one local university. In 2008, Jamaludin was appointed board member of the GSMA (the global World GSM Association). He was also appointed board member of Multimedia Development Corporation Malaysia (MDeC) in 2009.

Jamaludin earned the accolade of Malaysia’s ‘CEO of the Year’ 2000 by American Express & Business Times and was inducted into the Hall of Fame for ‘Services to the Mobile Telecommunications Industry’ by Asian Mobile News in 2004. He was also named Asian Mobile Operator CEO of the Year by Asian Mobile News Awards 2007.

Amir Hamzah Bin Azizan was appointed President/Chief Executive Officer (CEO) and Director of MISC Berhad on 1 January 2009. He graduated with a Bachelor of Science Degree in Management (majoring in Finance and Economics) from Syracuse University, New York. He had also attended the Stanford Executive Programme at Stanford University, USA and the Corporate Finance Evening Programme at the London Business School, United Kingdom.

Amir Hamzah joined MISC in 2000 and was the Group's General Manager, Corporate Planning Services. Subsequently in 2004 he was the Regional Business Director (Europe, Americas, Africa and FSU) of MISC based in London, UK before being appointed President / CEO, AET Tanker Holdings Sdn Bhd on 1 April 2005.

Prior to joining MISC, he served the Shell Group of Companies for ten years in various capacities including Head of Financial Services and Manager, Planning & Support at Sarawak Shell Berhad, Marketing Credit Accountant at Shell Singapore Ptd Ltd, Internal Auditor at Shell Eastern Petroleum Pte Ltd and Senior Treasury Advisor at Shell International Ltd, London. Amir Hamzah is Chairman of the Boards of major subsidiaries of MISC Berhad, among which includes Malaysia Marine and Heavy Engineering Sdn Bhd, MISC Integrated Logistics Sdn Bhd, Malaysian Maritime Academy Sdn Bhd and MISC Agencies Sdn Bhd.

Amir Hamzah is also Deputy Chairman, AET Tanker Holdings Sdn Bhd. He is also Director of Bintulu Port Holdings Berhad and NCB Holdings Berhad. Amir Hamzah is Board member of UK P&I Club, PETRONAS Maritime Services Sdn Bhd, as well as Executive Committee member of INTERTANKO. He is also council member of the American Bureau of Shipping, and General Committee Member of Bureau Veritas. He is also a member of Management Committee of PETRONAS.mir Hamzah bin Azizan was appointed as the President / Chief Executive Officer of MISC Berhad on 1 January 2009.





Raised in a fishing village, Chia Song Kun graduated from University Malaya with a B Sc (Hon) degree majoring in Mathematics and worked as a lecturer with Mara Institute of Technology before venturing into private education business and co-founded Inti College (now Inti Universal Holdings Berhad). Having been there and done that, Chia decided to return to his roots - the fishery business, and together with his family members, started QL Group.

Chia nurtured and transformed the business into a diversified agro-based Group with interests in processing of marine products, livestock farming and palm-based activities. Adopting a "win-win" approach, QL Group has now become the largest distributor of animal feed and surimi-based products manufacturer in Malaysia, the largest producer of surimi in Asia, as well as a leading poultry egg producer in Malaysia. Its products could also be found in Japan, Korea, Singapore, Brunei, Australia, China, Sri Lanka and Vietnam. Under his visionary leadership, QL was listed on Bursa Malaysia in 2000 and since then, the Group recorded a healthy turnover and net profit 5-year CAGR of 18% pa and 22% pa respectively. Today, QL Group has sales of more than RM1.4 billion, employing more than 3,000 employees.

Under the leadership of Mr Chia Song Kun, QL has developed a business model that has the following sustainability:
• Stable, broad-based and ample opportunity for growth.
• All 3 core activities are based on Malaysian agriculture resources.
• Food-based business is resilient and has full of value adding and export potential.
• Well aligned with government’s initiatives to grow the fisheries & agriculture industry.
• Able to enjoy tax incentives that are available under the agricultural & fisheries sectors.

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