September 11, 2012, 11:40 am
Filed under: Corporate Governance, Rakyat's concerns | Tags: , , , ,

It was with nostalgia when I read yesterday about Bursa Malaysia listed KNM’s plans  to list its main subsidiary, BORSIG (an engineering concern based in Europe) on the Singapore Stock Exchange (SGX)

Nostalgia… a negative sense…….in that back in the late 1990s when the economic tail-spin in Malaysia occurred, it was essentially triggered by a similar listing of Time Dot Com Berhad, a subsidiary of  listed Time Engineering Berhad then.

Time Engineering Berhad was part of the listed conglomerate, United Engineers Berhad (UEM), then headed by the infamous Halim Saad.

[Note: The other trigger was of course Renong acquiring a 32% in UEM from various ‘parties’ (read: connected parties?) for RM3.2 billion cash! Many believe they were related to Halim Saad himself.]

The ‘uniqueness’ of the Time Dot Com listing then was that the company contributed close to 100% of Time Engineering Berhad’s revenue.

So why are two companies being listed at the same time when the companies’ valuations are  dependent on that one and ONLY business of theirs?


There are rules to such situations…..technically they are called ‘chain listing’ rules.

Is it no wonder that its IPO in 2001 was not well received and its IPO price of RM3.30 could not survive that level at all…..especially when its parent company, Time Engineering Berhad, was also listed.

It’s tantamount to valuing the business twice…….hence attempting to hoodwink the market.

It couldn’t and closed at RM1.72 at the end of the first day of IPO and RM1.50 at the end of the first week!

[Time Dot Com has since become another ‘play’ involving a hand-picked croney – which I may comment some other time]

But….but… would ask …… how can two separate companies but with the same business be listed?

Well, there’s the political cables that can be pulled by these corporate chieftains then…….and even now!

Zoom to the present now……..and you have KNM Berhad seeking to do a ‘Time Dotcom’ listing…..some 11 years later!

The beauty of KNM is that it’s the SECOND punch for them!

What was the first?

It was back in 2008……..yes, just before the March2008 General Elections then! Notice, most of these controversial deals occur just prior to the General Elections.

That was when KNM bought BORSIG for RM1.7 billion cash from ‘various foreign individuals’…..lucky buggers?

BORSIG did not even have a sustainable track record (rule has been done away with, so I’ve been told!). It had profits of RM170m the year prior to the acquisition…….and the years before that, the profits were insignificant.

So BORSIG was priced at a price-earnings multiple of 10 times based on just a one year result!

We all know how easy it is to ‘cook’ the books just for one year…….of course, I’m not insinuating that BORSIG did!!

A significant portion of the RM1.7 billion acquisition was paid for by KNM’s shareholders through a Rights Issue……where KNM’s major shareholders included the pension funds, of course!

The market never really accepted the valuation of BORSIG……which explains KNM’s poor share price since the deal in 2008.

This may also explain why KNM is now seeking to list BORSIG on the Singapore Stock Exchange…..purportedly to realise BORSIG’s ‘true valuation’……reportedly to be in the region of RM1.8 billion….not very far from KNM’s original acquisition price of RM1.7 billion!

Placing out 25% of Borsig’s shares under the SGX IPO would accrue RM450m to KNM……to ‘spend’.

Well, the next General Elections is due, right?

But, but….hold on …… doesn’t BORSIG’s profits make up most, if not all of the KNM Group’s bottom line?

Answer : YES!

So…..again, we will have two listed companies….one at Bursa Malaysia, and the other at SGX…… whose separate valuations are premised on the same business!

[Note: This is different from a dual listing where the shares listed on two separate exchanges…..but are of the same company]

Is there a more fundamental reason for this exercise to take place?

This time round, the chain listing rule appears to have been avoided by listing the entity overseas……SGX will allow the listing of Borsig on its bourse as long as KNM isn’t!

Casting aside all the technicalities and rhetoric……..isn’t this really an indirect but polite way for Malaysian listed companies to get their shares listed at a more vibrant foreign bourse eg SGX.

The plan then is to subsequently ‘allow’ the Malaysian listed entity to ‘die a natural death’ by distributing the shares of the foreign listed entity directly to the shareholders of the Malaysian entity……when the latter is de-listed?

Looking at the way the Malaysian corporate landscape is evolving, it certainly does not make good reading for the country’s economic fundamentals!


3 Comments so far
Leave a comment

i think u know nuts abt the play…then y genting list Genting SP? Genting SP constribute huge revenue n profit to Genting Berhad….

Comment by wik leong

I think you’ve missed the point altogether.

The key issue is that Malaysian companies are listing their subsidiaries overseas and not on the Malaysian bourse.

Take your example, Genting SP. why did Genting Berhad list this subsidiary of theirs in Singapore instead of Malaysia?

Would Genting SP have achieved a market cap of S$17b and ranked top 10 in Spore IF it had been listed on Bursa Malaysia?


Even if Genting SP contributed 100% of Genting Berhad’s profits(which it doesn’t), smart investors including yourself (I presume) would prefer to buy Genting SP shares instead of its parent – the reason being its pricing!

As simple as that!

Comment by scwatch

you paranoid !

Comment by Anonymous

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