Sunday, March 28, 2010

Clear For Jerneh

It was a revealing article in The Edge where Jerneh Asia spokeswoman said "We are concentrating on the corporate exercise of the insurance business ... we are still in the midst of talking to the relevant parties on a stake sale.." How to deny but not really deny!

Robert Kuok does not "play up" his counters. Jerneh Asia was below RM1.50 as early as November last year. There were two big ramp up sessions, the first was a couple of months back when it went to RM2.40, and the recent one which we are in the midst of - which went above RM2.80.

There was a corporate announcement in December last year that Bank Negara had no objection in principle for it to commence talks with relevant parties keen to acquire its 80% stake in Jerneh Insurance Bhd. That looked pretty clear to me.

There could two options, a sale or a privatisation. Robert Kuok has been streamlining its business activities in Malaysia disposing the sugar unit to Felda for RM1.29bn. I think Robert is getting out of businesses where he cannot see the ability to be a major player regionally. Looking at where his net worth has been getting the bulk of the incremental wealth from - its, properties and palm oil.

There are plenty of interest now in Jerneh's business, in particular after Prudential scooping AIA. Read the Great Eastern (Overseas Assurance) article in the link below:

The final question is what price. Its NTA is RM2.41. Looking at similar deals, they have been between 1.5x to 2.5x. Jerneh' insurance business is well managed and should be priced at a premium to recent deal but probably would be closer to 2.0x. This makes for a range of between RM3.61-RM4.82. Caveat emptor people, but it looks good.

NOTE: The above opinion is not an invitation to buy or sell. It serves as a blogging activity of my investing thoughts and ideas, this does not represent an investment advisory service as I charge no subscription or management fees (donations are welcomed though). The content on this site is provided as general information only and should not be taken as investment advice. All site content, shall not be construed as a recommendation to buy or sell any security or financial instrument. The ideas expressed are solely the opinions of the author. Any action that you take as a result of information, analysis, or commentary on this site is ultimately your responsibility. Consult your investment adviser before making any investment decisions.


Synergy Hub said...

Dear Salvatore,

what about MBSB? Do you think it is a potentially undiscovered gem? Financially strong and firmly controlled by EPF/Khazanah.
Do you think it will rally in line with the Gov's urge to make GLCs more liquid?

Salvatore_Dali said...

I think MBSB has its attractiveness but their cost of funding is too high as their access to depositers is poor. Still, it should not be left out there on its own ...either expand or privatise, both will see a fairer price of 1.30 for the company, but we don't know when.

Richard said...

Dear Dali,

Top notch observations as usual.

Any updates of Kelington since your review late last year? Whispers of transfer to Main Board and potential corporate exercise( Bonus Issue perhaps?)


VERITAS said...

For your information, Kuchai's main asset is 3.032m shares of Great Eastern.

Synergy Hub said...

Hi Salvatore,

Believe it or not? I just heard a rumour saying that MBSB is going to be privatised. Any news?

Ooi Beng Hooi said...

The Edge Magazine this week reported that Jerneh Insurance could be sold at a price of RM 875 million, or 3.5 times of book value