What’s with MAA?

WHEN companies are left with excess cash and no core business, the right and only thing to do is return the money to shareholders. That is what most companies do.

MAA Group Bhd is cash-rich after having disposed of its domestic insurance business for Rm364.4mil in 2016. The last tranche of the remaining sum, amounting to Rm88.6mil, came into the coffers of the company in July this year.

The company has been paying dividends but it sure can afford to pay out more instead of acquiring stakes in companies that undertake business outside its core area of expertise.

The latest acquisition is an additional 2.42% in Altech Chemical Ltd, a mineral and chemical processing company that is listed on the Australian Stock Exchange. With the latest purchase that cost Au$2mil (Rm5.84mil), MAA Group now holds 6.78% in the enlarged capital of Altech.

Altech is in the business of developing high-purity alumina (HPA) and has aluminous clay resources in western Australia. The HPA market is estimated to be worth Us$1.1bil and it is used in the manufacture of semiconductors, LED lighting, lithium ion batteries and various other lighting equipment.

However, Altech is a loss-making entity. Hence, with a stake of less than 7%, what is MAA’S plans for the company?

In September, MAA acquired two companies that are in the business of providing private education for Rm27mil. MAA contended that the purchase would allow the company to penetrate the private education and tuition business.

The private education space is booming, and hence, there is some logic in MAA’S move into that area.

However, the mineral business is volatile and risky. Why is MAA shoring up its position in Altech?

Based on announcements, as of June this year, MAA still had slightly more than Rm300mil in its kitty from the sale of the takaful insurance arm.

The company should perhaps consider being more aggressive in returning money to shareholders instead of going into risky mining investments.