Tuesday, August 16, 2005

Robert Kuok Exits Pelangi

PERMODALAN Nasional Bhd (PNB) expects to complete its acquisition of Pelangi Bhd, a property developer, by next week. PNB president and chief executive officer Tan Sri Hamad Kama Piah said the company had sought a three-week extension for the mandatory general offer (MGO) from July 18.

"We have been given an extension until August 26 for the minority shareholders to accept the offer. We have to wait until then before we can conclude the MGO," he said.

"This was the third extension as some (minority shareholders) wanted time for them to decide (whether to accept the offer)," Hamad Kama Piah told newsmen.

Meanwhile, Bursa Malaysia Bhd said in a statement that it has delisted Pelangi, effective yesterday. Hamad Kama Piah explained that as PNB had acquired more than 90 per cent of Pelangi, Bursa Malaysia had to delist the company according to the listing requirements. Hamad Kama Piah also said an exco has been set up to chart Pelangi's future direction and programmes. "We have decided to let the Pelangi board members determine the direction they want to take and we will monitor their progress. We have appointed exco members to chart and oversee suitable programmes.“ Acquisitions of stakes in companies are very much in PNB's plans, he said, adding that PNB will buy and sell when the opportunity arises. "As a fund manager, we are strategically positioning ourselves in certain areas.“ On the current market sentiment, he said the trend is improving and he believed that the fundamentals are there.

On May 26, 2005, Business Times reported that PNB had made a mandatory takeover offer for the 50.74% stake it does not already own in property developwe Pelangi Bhd for RM 283.74 million. PNB offered to pay in cash for Pelangi’s 369.49 million shares at 77 sen per share. In its financial year ended March 31, 2005, Pelangi reported a net profit of RM32.17 million on the back of RM168 million in revenue.


Is PNB Buying into a sunset institution? Pelangi, is a household brand name in housing development, particularly in Johor Bahru, and is reknown for it's quality houses and strategic positionings, and locations. It is generally believed that Pelangi's houses has a 10% premium over market prices.

In fact Pelangi were the one of the pioneer property developer that offers largescale residential housing estates that are 8m wide (24ft width). Those houses, you can see them parking up to four cars within their fenced compound. Most Malaysian residential houses are 22ft or 20ft wide. In Kuala Lumpur and Selangor, you can even see houses of 18ft width. In fact, those buyers will feel claustrophobic.

With the exit of Robert Kuok, Pelangi announced the resignation of Frank Goon Swee Keong as the company’s MD and Datuk Musa Ayub Saad, Datuk Md Zahari Md Zin and Huang Yan Teo as directors.

The success story of Pelangi is synonym with Frank Goon. It was Frank's dream and vision that had brought Pelangi to what it is today, although the credit goes to Robert Kuok. Frank is a brunt and straight man, who is unassuming; he does not accept second best. He is the driver of the system and adopts a power culture. Frank is known to be one who will give stupendous reward to his people who are high performers.

Over the last few years, the property business in Johor Bahru is getting more competitive and less lucrative. Literally, Pelangi had ride on the good market time, a time where competition is not as stiff as of today. Johor Bahru is seeing a mushrooming of housing estates and the infiltration of myraid of "immigrant developers" coming from Kuala Lumpur and Singapore. Profit margins are coming down drastically, tho' still profitable. That seemed to be the objective reason for the readiness of Kuok to exit at a "ripe" time.

PNB will be acquiring an asset in the sunset period. It will pose a great challenge to the acquirer to emulate the previous success story of Frank Goon and his acolyte. Good luck to PNB; and it surely will be better luck to Frank Goon and Kuok Group.

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