UEM still pondering on Time stake

KUALA LUMPUR: Conglomerate UEM Group Bhd is still weighing options for its 45% stake in information and communications technology firm (ICT) Time Engineering Bhd.

According to UEM Group managing director and CEO Datuk Mohd Izzadin Idris, the company will "thoroughly and comprehensively" look into the matter. He said this amid market talk that UEM may dispose of its stake in Time.

"We are looking at and evaluating options but we are not in negotiations with anyone yet," Izzadin told reporters after a Time shareholders' meeting here on Monday, June 6.

At Time shares' closing price of 47.5 sen on Monday, UEM's 45% stake comprising 349.1 million shares in Time was valued at RM165.82 million.

The Edge Financial Daily, quoting sources, had in July 2010 reported that UEM planned to dispose of its 45% stake in Time. A few weeks ago, sister publication The Edge had similarly reported a few offers made to UEM and its parent state-controlled investment arm Khazanah Nasional Bhd.

The sale is seen as part of UEM's asset disposal scheme to reduce the conglomerate's non-core businesses in line with the transformation programme for government-linked entities.

UEM's high-profile asset disposals include the sale of its entire stake of 86.81% in Pharmaniga Bhd to Boustead Holdings Bhd for RM534 million or RM5.75 a share in June last year.

It is believed that UEM has intentions to dispose of its other assets as well.

In December 2009, Khazanah managing director Tan Sri Azman Mokhtar had said the investment entity was seeking good buyers at the right price for stakes in some of its companies.

In October that year, Khazanah had sold some 3.6 million shares (0.07% stake) in highway operator PLUS Expressways Bhd as well as a 5% stake in Malaysia Airports Holdings Bhd a month earlier, as part of the fund's plan to reduce its shareholding in government-linked companies.

Izzadin, who is also non-executive director of Time, said the company would focus on its ICT operations after the offer for sale (OFS) of the company's entire 24.74% stake in Time dotCom Bhd (TDC) was concluded.

"It is based on the current plan," Izzadin said.

In January this year, Time announced a plan to undertake a renounceable OFS of its stake comprising 626.18 million shares in TDC to shareholders of Time. The exercise will be done on the basis of eight offer shares for every 10 existing Time shares held. Shareholders of Time approved the proposal on Monday.

Note that Time shareholders had in July 2009 given the mandate to Time to sell its TDC shares at a price not lower than 48 sen each.

Assuming the offer shares are distributed at 48 sen each, the OFS will generate proceeds of RM300.57 million for Time. Of the amount, 96% or RM287.8 million will be used to redeem the Redeemable Secured Loan Stocks (RSLS) due to Bank Pembangunan Malaysia Bhd while the balance will be for financing the ICT company's working capital needs.

The OFS is the final chapter of Time's plan to dispose of its stake in TDC. Time had in July 2009 announced its intention to sell up to 726.18 million shares or 28.69% in TDC.

Subsequently, Time had from July to September 2010 disposed of a total of 100 million shares in TDC in the open market for a total net consideration of RM57.4 million or 57 sen each.

The proceeds were fully used to partially redeem the RSLS and payment of accrued interest due to Bank Pembangunan. Following the shares' sale, Time's stake in TDC was reduced to 24.74% prior to the OFS.

Time's investment in TDC dates back to December 2000 when both companies were restructured. Under the scheme, TDC issued new shares to Time as payment for the former's debt to the latter on the basis of one TDC unit for every RM3 owed to Time.

Note that TDC's financials had improved in 1Q ended March 31, 2011 when net profit rose 22% to RM22.88 million and revenue grew 8% to RM70.06 million. The debt-free company has a cash pile of RM220.25 million.

Shares of TDC closed unchanged at 82 sen on Monday. Its latest reported net assets per share stood at 55 sen.