The shares and warrants of Malaysia Pacific Corp attracted investors' interest recently after it was disclosed to the exchange that the Hong Leong Group has ceased to be a substantial shareholder in the company.
It is not certain whether Hong Leong Group still has any shares left in the company or where the shares that were disposed have ended up. What is clear is that the company's major shareholder Bill C.P. Ch'ng is working out some corporate exercise to enhance the appeal of MPCorp. This is evident from the appointment of HwangDBS Investment Bank late last month as the company's financial adviser to evaluate various corporate proposals to position the group on a stronger financial footing.
MPCorp is predominantly a property development and holding company. It owns 905 acres in Masai, Johor located in the Iskandar Development Region (IDR) that is being developed as Lakehill Resort and City and Taman Nusa Damai.
Besides that, the MPCorp is also the owner of Wisma MPL, a free-hold office cum shopping complex in the Kuala Lumpur Golden Triangle.
MPCorp reported net profit of RM25.5mil or EPS of 14.8 sen for the financial year ended June 2007. This is a turnaround from the substantial loss of RM81.4mil in the previous year.
The financial result is not that meaningful as a substantial part of it is due to the revaluation of property asset and write-back of some tax provisions which had caused the big loss in the year before. Net asset per share of the company improved to 90 sen per share.
MPCorp stated in its latest quarterly report that the Lakehill Resort and City development is projected to generate an estimated gross development value (GDV) of over RM6bil, enough to keep the company busy in construction and development over the next 8 years, with a projected average 40% gross profit margin.
MPCorp added that if all the projections were to go smoothly and are sustainable, its future should look bright and be in positive territory for many years to come.
MPCorp also stated in its result notes that it had received several offers for the purchase or joint venture of Wisma MPL.
It views this as an opportunity to unlock the value of Wisma MPL for shareholders. The company expects to derive a handsome net cash position that can be better utilized for use in fast-tracking the development of Lakehill Resort-IDR, Johor, and to explore other new business opportunities.
Investors who buy into the company should note that Ch'ng's companies had undertaken a mandatory general offer for all MPCorp share it did not own last last year at 20 sen per share but there were not many who accepted the offer as the offer price was too low. Ch'ng was the original architect of Genting Highland Casino Hill Resort between 1965 and 1972.
He was also a prominent corporate player in the 1980s and was named one of the “50 Asia 's Top Corporate Takeover and Turnaround CEOs” by Business Weekly International magazine in 1989. Ch'ng had resided in Hong Kong for 20 years between 1984 and 2004 and returned to Malaysia in 2004 to begin his association with MPCorp.
MPCorp-WA is trading at a very high premium of 151%. From a trading point of view. MPCorp-WA at implied volatility of 168% is also considered very expensive even though the underlying share is extremely volatile and has a short term historical volatility of 110%.
It seems that warrant buyers have very high expectation of Ch'ng turning around the company into a big winner.
However, riding the mother share together with Ch'ng may be a wiser choice since the gearing of the warrant is not very high.