Move to privatise Tanah Makmur due to bauxite mining ban?

PETALING JAYA: The proposed privatisation of Tanah Makmur Bhd, less than two years after it was listed in July 2014, could have been triggered by the extension of the ban on bauxite mining.
An analyst who has been following the company said the outlook for Pahang-based Tanah Makmur appears to be less exciting without the bauxite mining business, in which it ventured in mid-2014 after the discovery of 1.2 million tonnes of bauxite deposits on its KotaSAS township landbank.
"At this point in time, it (the privatisation) looks like due to the ban on bauxite mining because it is a big contributor to their earnings ,there is no exciting story in the company, so the major shareholder just privatises it.
"There is not much interest in this stock. The main excitement is from bauxite mining. The plantation business is quiet and, for the property business, they're waiting for the award of the Pahang government administrative complex project," she told SunBiz.
Given the ban on bauxite mining, which has been extended for three months till July, she expects the company to deliver poor results for its latest quarter.
Tanah Makmur's net profit was flat at RM53.85 million for the financial year ended Dec 31, 2015 compared with RM53.87 million a year ago. At the pre-tax profit level, plantation and property development contributed RM30.84 million and RM70.61 million respectively.
Contribution of bauxite mining, which is part of the property development business, was unavailable.
Based on the remaining reserves of 800,000 tonnes, Kenanga Research expects the mining operations to contribute revenue of RM65 milion to RM92 million for FY15 and FY16.
Tanah Makmur has said its bauxite exports contribute between 20% and 30% to its revenue annually. Prior to the suspension, the company was producing 50,000 tonnes to 70,000 tonnes of bauxite a month.
Nonetheless, Areca Capital Sdn Bhd CEO Danny Wong Teck Meng is of the view that the privatisation move may not be associated to its bauxite mining activities. "For any business, there is always a set of rules to follow and the decision to comply with the regulations, I don't think this is the main issue for the privatisation."
Wong opined instead that the company may have found it difficult to get used to being thrust under the public view and the listing requirements, resulting in the privatisation exercise.
"They used to be a private company, but after listing, they might have found that there are many things they cannot do due to the listing rules and regulations," he noted.
The offer price of RM1.80 per share values Tanah Makmur at 13.4 times for price-to-earnings ratio, which is higher than the 9.67 times when it was listed at RM1.20 per share.
Again, the analyst said, the privatisation offer of RM285.13 million or RM1.80 per share does give a decent premium compared with its share price of around RM1.30 to RM1.40 in the past few months.
The counter was unchanged at RM1.66 yesterday, with some 165,100 shares changing hands.
Tanah Makmur's major shareholder, the Tengku Mahkota of Pahang Tengku Abdullah Sultan Ahmad Shah, and parties acting in concert own a combined 69.9% stake or 278.2 million shares in the company. The company said this corporate exercise is an opportunity for shareholders to realise their investments at a premium of between 22.45% and 30%, and also the result of low trading liquidity of the shares.