Great Eastern factor a boost for Kuchai Development
Low-profile Kuchai Development Bhd could be a major beneficiary of the impending listing of Great Eastern’s insurance arm in Malaysia.
Kuchai is the sixth-largest shareholder with 3.03 million shares in Great Eastern Malaysia’s parent company, Great Eastern Holdings Ltd (GEH), that is listed in Singapore.
GEH, in turn, wholly owns Malaysia-based Great Eastern Life Assurance (M) Bhd (GELA) that is likely to go for a listing to comply with Bank Negara’s ruling requiring insurance companies to have at least 30% local equity participation.
The stake is reported to fetch a value of RM4.1bil (US$1bil).
If the listing happens, the anticipation is for GEH to declare a bumper dividend, which would benefit Kuchai.
In September last year, GEH announced that it was assessing possible options relating to a minority stake in GELA to comply with foreign ownership requirements.
This was in response to questions on Bank Negara’s requirement, which was announced in 2016, for foreign insurance companies to have at least 30% local equity participation.
Even without the listing of the Malaysian insurance arm, Kuchai is trading at a discount to its intrinsic value. At GEH’s current share price of S$30 (RM90), Kuchai’s interest in GEH alone is worth some RM273mil, which is bigger than Kuchai’s market capitalisation of RM193mil.
Kuchai has a clean balance sheet with cash of some RM61.95mil and no borrowings.
Business-wise, Kuchai is principally involved in investment holdings and rental of property. Properties of the company include eight acres of land in Semenyih, Selangor, and a shop-house Emerald Hill Road, Singapore.
As at June 30, 2017, the Singapore investment property continued to achieve an occupancy rate of 100%, and was valued at S$8.3mil.
The group’s investment holdings consist of holdings in domestic and foreign-listed equity securities, investment funds and selected physical commodities.
Kuchai is 42.21% owned by Kluang Rubber Co Bhd, and 9.44% held by Sungei Bagan Rubber Co Malaysia Bhd.
The deadline for the requirement for foreign insurance companies to have at least 30% local participation is in the middle of this year.
However, considering that it would be a commercially-driven exercise, industry executives have said that insurers would be given time to comply with the ruling.
Other foreign insurers reportedly in discussion to dispose of their stakes in their respective Malaysian subsidiaries ahead of a Bank Negara deadline requiring a 30% local ownership include Prudential plc of the United Kingdom and Tokio Marine Holdings of Japan.