SELANGOR state-controlled Kumpulan Perangsang Selangor Bhd (KPS) could be privatised in the near term, two separate sources who are familiar with the matter tell The Edge.

One source adds that Darul Ehsan Investment Group Bhd, KPS’ 57.88% shareholder, has appointed CIMB Investment Bank Bhd to handle the corporate exercise.

“There is no point in keeping it (KPS) listed. The company’s stock has underperformed for the longest time,” he explains.

The other source says he had heard that KPS’ privatisation was in the pipeline but did not know if CIMB had been given the mandate to handle the corporate exercise.

Market observers are not surprised that the exercise was being contemplated as KPS’ stock has long been undervalued.

At its close of 74.5 sen last Thursday, the company had a market capitalisation of RM400.35 million. It had a net asset per share of RM1.78 as at end-June, which means that its shares were trading at only 42% of the company’s value.

At end-December 2007, KPS’ market capitalisation was at a record RM1.35 billion, but it has not seen such highs since.

KPS’ stock hit a multi-year low of 29 sen in mid-March this year after the Pakatan Harapan government, which controls Selangor state, lost control of the federal government to Tan Sri Muhyiddin Yassin’s Perikatan Nasional.

The Selangor state government may not have to fork out much for a privatisation. Other than Darul Ehsan Investment Group, other notable shareholders include Perbadanan Kemajuan Negeri Selangor (PKNS) or the state economic development corporation, which has 5.52% equity interest in KPS. Both Darul Ehsan Investment Group and PKNS are under Selangor’s Menteri Besar Inc (MBI).

All in, the Selangor state government has about 65% equity interest in KPS, meaning a privatisation at last Thursday’s close, coupled with a 20% premium, would set Darul Ehsan Investment Group back by only about RM170 million.

For its six months ended June this year, KPS suffered a net loss of RM8.27 million from RM455.86 million in revenue. For the corresponding period a year ago, it chalked up a net profit of RM4.1 million from RM316.62 million in revenue.

As at end-June this year, KPS had cash and bank balances and short-term funds of RM251.38 million. The company also had RM66.97 million as assets held for sale. This means that its cash per share was 46.78 sen as at end-June, and this could expand further after the sale of assets.

On the other side of the balance sheet, it had long-term borrowings of RM495.7 million while short-term debt commitments were pegged at RM67.98 million.

KPS’ key businesses include wholly owned Toyoplas Manufacturing (Malaysia) Sdn Bhd, an integrated plastics injection moulding outfit; CPI (Penang) Sdn Bhd, which undertakes the manufacturing, assembly and sale of electronic and electrical products and plastic moulded components and parts; wholly-owned packaging company Century Bond Bhd; mattress manufacturer Kaiserkorp Corp Sdn Bhd; a 60% equity interest in Smartpipe Technology Sdn Bhd, which does pipe rehabilitation and replacement jobs; 51% interest in Aqua-Flo Sdn Bhd, which provides chemicals to water, waste and sewage treatment plants, and a 51% stake in KPS-HCM Sdn Bhd, which is involved in building and road construction and maintenance.

It has a presence abroad via businesses such as Toyoplas Manufacturing and Kaiserkorp.

According to KPS’ annual report for FY2019, as at end-2019, the company owned a 32-storey building in Shah Alam, valued at RM51.51 million; a 45-year-old hotel in Kuala Lumpur with a net book value of RM40.17 million, and about RM60 million worth of land and buildings in Penang, among others. Toyoplas Manufacturing has assets in Indonesia valued at about RM37 million, and a plant in Kulaijaya, Senai in Johor, which has a net book value of close to RM6 million.

In addition, KPS has a 20% stake in highway concessionaire Sistem Penyuraian Trafik KL Barat Sdn Bhd, which operates the 26.5km Sprint Highway that connects to the Kerinchi Link, Damansara Link and Penchala Link.

In a nutshell, the parent company could make a tidy sum if KPS is asset stripped.

KPS is the only remaining publicly traded entity controlled by the Selangor state government. In April 2013, Kumpulan Darul Ehsan Bhd, another company under MBI, acquired KPS’ 56.57% stake in Kumpulan Hartanah Selangor Bhd for 76 sen a share or RM193.47 million cash, and privatised the company.

In August 2006, property developer Worldwide Holdings Bhd — a 51% unit of PKNS — was privatised but there has been talk lately of the company being injected into other companies for a reverse takeover on Bursa Malaysia.