The GLCs can be Sabah’s silver lining
Published on: Sunday, June 13, 2021
By: Datuk John Lo
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Thanks to my senior banker friend who has compiled this list based on available financial statements of 2019. This list may not be totally comprehensive. My apology if any performing GLC has been left out. It is unintentional.
Sabah Government also has 2 listed vehicles in KLSE, Suria Capital, Innoprise Plantations whose performance is OK.
Why GLCs for IPO?
Successful and well managed GLCs are pre-requisites to countries attain success. If a country cannot manage GLCs well it is unlikely to be able to manage its economy.
4 other important reasons. [a], to qualify for IPO will require a GLC to achieve some minimum standards of creditable performance and size. [b], the Board of Directors will be obligated to adhere to compliance and governance of KLSE. [c], the GLCs can raise public funds for development of Sabah, easing the pressure on Sabah Government for development fund. [d] Management expertise is lacking in GLCs. Sabah should build up an elite management team to manage the GLCs.
Performance Comparison of GLCs vs Industrial peers.
Worthy to note at this stage is that some GLCs, though in positive, have experienced declining profitability, some sharply. One in particular has been profitable in tens of millions but its profit has slammed to RM6 million in 2019. How can this happen? Who has allowed it to deteriorate to this stage? Is it acceptable just because it has made a few million bucks? Where has all the money gone? Why no flag raised? Sadly, this has happened when they have monopolies and/or government support. This is not right, Needs looking into.
In this context, is the performance of Sabah GLC silver linings acceptable? In assessing their performance, political criteria should not be used. In fact, it should be avoided as these will muddy the water. The best is to examine their financial results over a number of years in comparison with their industrial peers. If their performance is equal or better than industrial peers, I would recommend to Datuk Masidi that the Board, Management and staff, in all fairness, should be duly recognized and rewarded. Such performance, I would venture to say, are rare. So, congratulations are very much in order.
On the other hand, for those underperforming GLCs, I understand forensic audits, are being done or will be done soon.
Performing GLCs for IPO?
The strength and prestige of a major corporate group is the sum total of the financial well-being of all its subsidy and associate companies. Likewise, for any country or state. Malaysia has Khazanah, Singapore’s Tamasek, Norway’ Sovereign Investment Fund. Johor, Sarawak and Selangor have strong GLCs, some of them are quite prominent in KLSE. Bintulu Port’s market capitalization is more than RM2 billion. Suria Capital’s is only a few hundred million. Very far away. Suria Capital can be groomed for bigger roles if it has long term security on the tenure of the ports. Some Sarawak’s GLCs are conglomerates, Sabah’s ones are babies in comparison.
As stated previously, Sabah has Suria Capital and Innoprise Plantation. They should be more, many more Sabahan listed GLCs on KLSE.
Sabah must grow their GLCs as listed vehicles so that they can raise public funds for Sabah’s growth and expansion. From the above list, Sabah can consider IPO for—- [1] Kinabalu Sawit, [2] Cement Industry Sabah, [3] Asean Supply Base [4] Sabah Soft Wood. [5] KKIP. [6] Sabah International Petroleum. Sabah Energy Corporation. [7] Tanjong Aru Resort [STAR] [8] Hyatt International. Some qualify for IPO on their merits. Others, with potentials can be grouped and groomed for IPO.
A few GLCs have tourism assets which are scattered here and there. YS has Shangri-La Tanjong Aru Resort and some valuable jungle resorts Maliau Basin, SEDCO Hyatt and Perkasa, Sabah Air has a tourist agency and a jungle resort. A well thought out plan can produce high value tourism products. Such dispersed investments and scattered ownership do not make investment/financial/management sense except for personal satisfaction and empire building. All these can be rationalized for eventual IPO.
Derive Max Value at GLC IPO.
With right direction, strategic planning and elite management, Sabah Government can unlock a huge amount of value by going for IPOs. I am certain that there are many good and capable management talents in the GLCs. Identify them and provide them with the opportunities to showcase their commitment and talents. Reward them appropriately. Three solutions: Meritocracy! Meritocracy! Meritocracy!
To achieve this, all the performing GLCs need to be reviewed, strengthened so that they can make sense. Again, this is not a political exercise. It is a pure corporate exercise meant to unlock max value [in $ and sen] for Sabah.
Foremost, the value of these performing GLCs can be greatly enhanced by requiring the Board of Directors and Senior Management to attain tip top governance and compliance, to produce convincing business/corporate plans that will double or triple profits, to be on par with industrial peers.
Best wishes to the Masidi Committee.
Let me once again pay tribute to DSP Masidi for taking on the onerous task to sort out the GLCs. This difficult job should and must be done. The Oversight Committee can benefit from inputs of experienced private sector players in —-[a] Categorising GLCs into performing and non-performing, potential of turn around, to be sold or close down. [b] GLCs’ performance vs peer groups’ performance. [c] Management system and standards. [d] Compliance and governance. [e] Direction towards greater profits. The Oversight committee can benefit from private sector inputs significantly.
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