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Steering MUI group out of the doldrums

TheEdge Mon, Dec 31, 2018 05:00pm - 8 months ago


FOR younger investors who started buying equities a decade ago or later, MUI group could be an unfamiliar name. After its glory days of the 1980s and 1990s, MUI group dropped off the radar screens.

Its four Bursa Malaysia-listed entities — Malayan United Industries Bhd (MUI), MUI Properties Bhd, Pan Malaysia Corp Bhd and Pan Malaysia Holdings Bhd — are currently trading at below 30 sen per share. Its UK-listed fashion and houseware brand, Laura Ashley Holdings plc, has been on a downward trend as well, with the counter falling from its peak of £29.75 to a 15-year low of £3.75 last Thursday. Of the five units, only MUI Properties is profitable.

About four years ago, rumour was rife that the founder and controlling shareholder Tan Sri Khoo Kay Peng, who has been out of the corporate limelight for a long time, was planning to restructure and revamp the group. At the time, asset stripping was said to be the strategy to unlock the hidden value of the group, which owns hotels, department stores and a securities firm among others.

True enough, it turned out to be speculation and nothing much happened.

Now, Kay Peng, 80, has tasked his second son, 46-year-old Andrew Khoo Boo Yeow, with steering the MUI group out of the doldrums. And this time, a concrete plan has been outlined to make the MUI group relevant again for the investing fraternity and consumers.

Andrew sees his immediate task as strengthening the foundations and putting the flagship MUI and the other companies in the group on a firm footing and then growing the businesses.

Under his stewardship, the group is undergoing a restructuring to make it a more lean and understandable structure. In the process, dormant companies are being shut down.

“One-third of the restructuring is completed. I want MUI to have no more than two listed companies in Malaysia. I want to bring as many of our assets as possible into MUI as part of the restructuring process. We should be able to complete it in two years.

“Ultimately, it is about unlocking value for our stakeholders. That is partly why we are doing this,” Andrew tells The Edge.

The group is open to asset disposals. In fact, it has already started down the divestment trail. Andrew says he is not that attached to the assets, but he stresses that disposals must take place at the right time and at the right price.

Its prime assets include the Corus Hotel in Jalan Ampang, Kuala Lumpur, and Corus Hotel Hyde Park in London.

Given its net tangible assets per share of 17 sen as at Sept 30, the group’s total net assets work out to RM527 million — which those who know the list of its assets would say does not reflect the true value. Corus Hotel Kuala Lumpur alone was reported to be valued at about RM310 million last year.

MUI’s market capitalisation was RM484 million based on last Friday’s close of 16.5 sen per share.

However, MUI has no intention of revaluing the assets, although this could give an instant boost to earnings with a hefty revaluation gain.

Asset disposals have helped the group pare down its losses. Its net loss for the financial year ended June 30 (FY2018), more than halved to RM56.08 million year on year after it sold three hotels.

“Right now we are still loss-making, although we have reduced our losses substantially. In the next one to two years, we hope to break even or enter positive territory.

“If our business development ventures bear fruit, we can propel our revenue forward. I would like to see MUI as a lifestyle company. We own brands, we know how to activate a brand — it is a lifestyle-driven business proposition,” Andrew says.

And that would be one proposition investors will continue to evaluate.
 

Making Metrojaya great again

Andrew’s vision for MUI, especially for its retail, property and hotel businesses, has been widely reported in the press this year, including his plans to bring a lifestyle concept to the group’s businesses.

His plans for MUI’s best known business venture — Metrojaya department stores — come at a tough time for the domestic retail sector. Indeed, MUI acknowledges this in its 2018 annual report. It says Metrojaya faces challenging retail conditions with increased competition from traditional retailers and online shopping portals, against a backdrop of uncertain consumer sentiment.

Andrew agrees that department stores as they stand today are becoming outdated and, hence, changes are needed.

“Department stores will have a dim future if we don’t make changes. We need to be open-minded and aggressive in changing the dynamics of the business. If this works, it could be a beacon of light for department stores in the future, but only time will tell,” he says.

“I am not ready to give up on the idea yet, but department stores as we know them must change. It could mean a reduced footprint ... smaller stores.”

The changes at Metrojaya are already underway. The revamp is getting a pilot run at the flagship store at Mid Valley Megamall.

The are six Metrojaya department stores in the country and two MJ stores. The group also operates speciality stores under the East India Company, Laura Ashley and Reject Shop brands.

Andrew also has big plans for MUI’s 35.17% associate, London-listed Laura Ashley, which operates furniture, home accessories and fashion stores in the UK, Ireland and France.

Andrew, who is the non-executive chairman of Laura Ashley, says the British company is going through a rationalisation and corporate strategy exercise that, like the Metrojaya revamp, will also be lifestyle-driven.

“There will be more focus on Laura Ashley hotels, spas, and a tearoom concept. Secondly, we are going to pivot more to Asia, which means China. We are selling products on T Mall Global [a Chinese online platform] and sales have seen rapid, double-digit growth.

“Our plan is to grow Laura Ashley into a sizeable business in China and make it a recognisable brand there. After that, we will probably roll out a physical store so we will have an online and offline strategy for China,” he says.

MUI has closed down 60 Laura Ashley stores and it currently runs about 160 stores.

“We probably would want to close more stores, maybe up to 40, because we want to rightsize the business. e-commerce is very important as 25% of [Laura Ashley] sales are online, so, going forward we do not need so many physical stores,” Andrew says.
 

To continue development in Springhill

Development will continue at the group’s flagship township, Bandar Springhill in Port Dickson, with 1,000 acres of land still undeveloped.

Andrew also plans to bring the lifestyle concept to MUI’s property development business. “Half of Bandar Springhill has been developed and we have another 1,000 acres, which will take another 10 years. We plan to bring lifestyle experiences to Port Dickson by building a clubhouse, a multipurpose hall and other amenities for residents.” 

The other 40% of Bandar Springhill is owned by Chin Teck Plantations Bhd, through its stake in West Synergy Sdn Bhd.
 

Confectionery

It may not be widely known that MUI manufactures and distributes its own brands of chocolate confectionery. Its best know brands are Kandos and Krispy chocolates.

“Next year, we are relaunching Krispy with new packaging and we will be spending some money on advertising and promotions for Kandos and Krispy to make them more fun for children,” says Andrew.

Like his father before him, Andrew wears many hats given the MUI group’s wide range of businesses.

He says Kay Peng must have believed that it was the right time to hand over the reins and enjoy his retirement.

But some might say that from Andrew’s perspective, the timing was not so good, given the current economic climate, the possible headwinds ahead and the soft equity market.

Only time will tell if Andrew can accomplish the mission entrusted to him, to make the businesses profitable again. But determination and hard work will certainly help him.

 

PM Securities is not left out in revamp plan

Andrew Khoo Boo Yeow, the son to whom MUI group boss Tan Sri Khoo Kay Peng has passed the baton, has outlined that the group’s four core businesses are hospitality/hotel, retail and fashion, food and beverage, and property development.

Financial services, which is housed under Pan Malaysia Holdings Bhd, does not fit into any of the four cores but PM Securities Sdn Bhd is not up for sale.

In fact, change is coming to the group’s financial services as well.

“We have brought in new board members and a new CEO ... We want to grow the business,” says Andrew, adding that he had just come from a board meeting at Pan Malaysia Holdings to plan the revamp before meeting The Edge.

He has discussed his plans to rebuild the retail business and when asked about the financial services, he sounds equally enthusiastic. He sees value in the universal broker (UB) licence that the company has.

“The universal broker licence allows us to do corporate finance (advisory services) ... we want to grow our remisier base and grow the online (stockbroking) business,” he says.

PM Securities is the last UB standing in the country. In December 2009, the Ministry of Finance declined to grant it an investment banking licence, which would have been a major step towards bringing back the glory days of the MUI group, which once owned MUI Bank Bhd. MUI Bank was later sold to Hong Leong Group, leading to the formation of the current Hong Leong Bank Bhd.

The main difference between investment banks and UBs is that the latter are not permitted to take deposits from the public.

UBs have a lower capital requirement of RM100 million than the RM500 million investment banks must park in equity.

This restricts stockbroking firms from undertaking major corporate exercises, such as bond issuance for clients or even underwriting a sizeable initial public offering.

Andrew is aware that the stockbroking and investment banking industry has changed tremendously since his father’s day. Competition is tough, but that does not mean he wants to give up on the financial services business.

Having heard of Andrew’s revamp plan, industry players will be watching the new kid on the block, to see if he can make a difference and make PM Securities shine again in corporate advisory services.








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