PETALING JAYA: Encorp Bhd has been seeing increased interest in its stock, with its price rising 34% since July 18 after its CEO Yeoh Soo Ann and chief operating officer Mohd Ibrahim Masrakin bought out the entire 30.55% stake in the company owned by executive chairman Datuk Seri Effendi Norwawi.
In what appeared to be a management buyout (MBO), Yeoh and Ibrahim bought over Effendi’s entire stake in Lavista Sdn Bhd, a private vehicle which in turn owns 66.64 million shares or a 30.55% stake in Encorp. The value of the transaction was not disclosed but Encorp had closed at 70 sen on July 18.
It rose 4 sen or 4.44% yesterday to close at 94 sen, giving the company a market capitalisation of about RM205 million.
“The MBO directly aligns the interests of the top management to the performance of the company,” said a market observer. He said Encorp’s management had been keeping a low profile, which could be a reason why the stock was overlooked despite it having some major developments in Kota Damansara here and the Iskandar region in Johor.
Property industry sources said the MBO had been on the table for several months.
“This would be a fresh new start for Encorp as the parties concerned had been deliberating on the MBO over the past six to eight months,” an analyst told The Edge Financial Daily.
While Effendi has ceased to be a substantial shareholder, Encorp did not say if he would be stepping down as executive chairman. The former minister of agriculture, who founded private television station NTV7 before it was sold to the Media Prima group, has been executive chairman of Encorp since September 2009.
Yeoh, now a major shareholder, became CEO of Encorp in 2011. He was previously an executive director of GW Plastics Holdings Bhd and a former executive director of finance at FACB Industries Inc Bhd.
Ibrahim joined the Encorp Group in 1997 as group director of operations and systems, before moving into various positions within the group’s businesses. He was the acting CEO of NTV7 before becoming COO of Encorp in 2004.
For the first quarter ended March 31, 2013(1QFY13) Encorp recorded a net loss of RM5.12 million on the back of RM72.12 million in revenue. It recorded a loss of RM1.52 million in 1QFY12.
Encorp attributed the loss to higher marketing and distribution expenses incurred for its property development projects as well as financing costs arising from the sukuk it issued last year.
The RM1.57 billion Sukuk was issued by its unit, Encorp Systembilt Sdn Bhd, to refinance previous debt undertaken to fund the construction of 10,000 units of teachers’ quarters throughout Malaysia, based on the “build, transfer and finance” concession concept.
The quarters were delivered in 2004 with the government making monthly concession payments to Encorp Systembilt until the expiry of the 30-year concession in February 2028.
In the financial year ended Dec 31, 2012 (FY12), Encorp’s net profit fell 71.8% to RM6.91 million, from RM24.57 million previously. However, its FY12 revenue rose 36.76% to RM396.52 million, compared to RM289.93 million in FY11.
This article first appeared in The Edge Financial Daily, on July 23, 2013.