TDM in transformation mode
Plantation and healthcare company eyes a place in the top 100 of Bursa Malaysia
PLANTATION and healthcare group TDM Bhd is undertaking a major restructuring exercise in its core businesses and has set a goal to be one of the top 100 public-listed companies by market capitalisation on Bursa Malaysia by 2022.
Under the group’s 2017-2022 transformation model, TDM hopes to attain a market capitalisation of RM2bil, RM100mil in annual dividend and RM1bil in revenue within the next five years. .
To perform this challenging task , Raja Datuk Idris Raja Kamarudin, who was previously the group’s executive director back in 2000 to 2004, has made a comeback to assume the position of the group’s new chairman.
With over 30 years of experience in the corporate scene, Raja Idris has helmed top management posts in private limited, public-listed and multinational companies with a proven track record of turning around the balance sheets of loss-making companies.
He is a director in Terengganu Inc Sdn Bhd, an investment-holding company of the Terengganu state government, which is a major shareholder of the TDM group.
Raja Idris tells StarBizWeek in a recent interview that “for the group to attain its ambitious target, several aggressive corporate changes within the group will take place starting from January 2019 onwards.
“We will need to undertake an expansion exercise as we only have four months left until the end of the year.
“So, the management and major shareholders will need to sit down to discuss on creating the right game plan for the group,” says Idris who recently took helm of the TDM group in July this year.
“TDM will be looking at mergers and acquisitions (M&As) in an effort to expand its existing businesses in the oil palm and healthcare sectors,” he says adding that the group would also be eyeing for new growth opportunities from the two business segments.
In plantations, Raja Idris says the group is considering to expand its plantation land beyond the borders of Terengganu as well as venturing into downstream activities such as setting up palm oil refineries.
As for the healthcare segment, the company is looking to increase its bedcounts to 1,000 beds, from 407 beds currently.
Earlier this year, TDM started the operation of its 143-bed at Kuala Trengganu Specialist Hospital (KTS), which will feature a heart centre by end of this year or early next year.
TDM also plans to build a 100-bed, purpose-built hospital in the Klang Valley which will likely take place next year with the definitive details to be finalised by year-end.
Paring debts
Apart from expansion growth and M&As, Raja Idris says top on his priority list will be to pare down the group’s current net gearing level of 0.7 times to drive value creation for its stakeholders moving forward.
Raja Idris admits that the biggest challenge would be to improve the balance sheet of TDM, given its high gearing ratio. “I have given myself six months to sort out this issue, particularly pertaining to the liabilities of the company.
“Personally, I believe that achieving profits alone will not be able to guarantee higher dividends for the group,” adds Raja Idris.
He also does not rule out the option of divesting the company’s non-performing assets.
“This (decision) of assets divestments is still not off the table.
“If we have to divest these assets for the sake of creating better topline and bottomline growth, then the management will do it to ensure sustainable dividends in the long run.”
Having said that, the board of director would not stall the group’s recent proposed acquisitions which are in the pipeline as “these investments still make sense and value accretive, ” explains Raja Idris.
Steps already taken to implement the TDM’s transformation model include its proposed acquisition of a majority stake in Ladang Rakyat Trengganu, the grant to TDM of land in Kemaman and Dungun by the Terengganu state government, the opening of the new 143-bed KTS and the proposed construction of 100-bed, purpose-built hospital in Sri Petaling, Kuala Lumpur.
For example, TDM’s proposed acquisition of Ladang Rakyat Terengganu will increase its planted acreage to 44,274 ha from 31,553ha currently, which in turn will pave the way for the group to almost reach its target of 52,000 ha of planted area by 2022.
The company was also recently given a land grant in Kemaman and Dungun by the Terengganu state government of 4,515 ha, but it is still subject to the environmental impact assessment study that is slated for completion within a year.
Meanwhile, TDM group chief executive officer Datuk Mohamat Muda points out that TDM would closely monitor the efficiency of its oil palm plantations, especially in terms of productivity, oil extraction rate, and the overall cost structure due to the current weak in crude palm oil (CPO) prices.
He expects CPO prices will stay under pressure in the third and fourth quarter of this year, given the rising palm oil stockpiles nationwide.
For 2019, Mohamat believes that CPO prices will stabilise with an average price of RM2,400 per tonne, in anticipation of a potential dip in CPO in the beginning of the year.
“In fact, I don’t see the bottomline numbers being good for 2018, without us doing something drastic over the next few months.
“But, we are realistically optimistic on the overall long term fundamentals of the industry, and will stay focus on improving our productivity while fully optimising the production cost,” adds Raja Idris.
Given the renewal and formalisation of TDM’s lease agreement in February this year, the group will have to pay a significantly higher annual rental to Terengganu State Development Corp, amounting to RM4.9mil from the current annual rental of RM429,695.
Meanwhile, Affin Hwang Capital Research in its latest report said CPO production in the country will improve in second half of 2018, but at a lower growth rate.
It has a CPO price assumption of RM2,350 to RM2,500 per tonne.
In recent months, the price of CPO has been on the downtrend, trading at its lowest level in two years as the slow export growth and high stockpiles continue to curb the market’s appetite.
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