Jetson ... Sept09

The non-interested directors of KJB have advised shareholders to reject the conditional takeover offer by Superior Pavillion Sdn Bhd (SPSB) and Odyssey Wealth Sdn Bhd (OWSB) for the group’s securities.

Its non-interested directors concurred with its independent adviser Kenanga Investment Bank Bhd (KIBB) that shareholders reject the offer as the prevailing market prices of the shares, ICULS and warrants were significantly higher than the offer prices.

Both KIBB and the non-interested directors said it was more beneficial for the securities’ holders who wished to realise their investment to do so in the open market.

As such, the non-interested directors turned down SPSB and OWSB’s joint offer for the remaining KJB shares for RM1 cash per share, outstanding 5% 10-year 2002/2012 KJB ICULS for 93 sen cash per unit and the outstanding 2002/2012 KJB warrants for 0.01 sen cash per unit.

The sons of the late Tan Sri S M Nasimuddin S M Amin, founder of the Naza Group, are undertaking a mandatory general offer (MGO) for KJB via SPSB and OWSB, in which they have substantial interests. Brothers S M Nasarudin and S M Faliq have made a revised price offer of RM1 for KJB shares and 93 sen for the ICULS. The original offer prices for the shares and ICULS were 70 sen and 65 sen, respectively, while the offer price for the warrants remains at 0.01 sen.

In Aug 2009, KJB’s major shareholders who controlled a 33.15% stake accepted the offer from the brothers, thus triggering the MGO. In that transaction, SPSB and OWSB acquired shares held by KJB group managing director Datuk Tee Kian An, chairman and executive director Isnin Rahim and executive director Tee Keng Kok as well as their private companies.

The non-interested directors are two of the three independent directors — Mohd Najib Abdul Aziz and Louise Paul Joseph Paul. The other independent director Datuk Dr Ong Ah Soon has a deemed interest in the transaction as his spouse Gan Ai Ring was one of the parties who sold their shares to the offerors.

On the joint offerors’ future plans for the KJB Group, the non-interested directors noted that the offerors intended to continue with its existing business and operations. They also noted that while the offerors did not have definite plans to restructure within the next 12 months, they may review, rationalise and reorganise the business or reorganise the group structure.

In view that the joint offerors have not put forth any concrete alternative business plans, the non-interested directors are unable to comment on the future prospects of the KJB Group if the offer is successfully completed.

Meanwhile, for the past five years ended Dec 31, KJB was able to maintain a positive gross profit margin ranging from 3.71% to 17.87% and a gross margin of 20.78% for its latest financial period ended June 30, 2009. However, due to the inconsistent growth of its revenue, the CAGR (compounded annual growth rate) of its revenue during this period is approximately -9.61%.

KJB’s gross profit margin trend seemed relatively stable except during financial year ended Dec 31, 2006. It added that KJB was able to manage its operational cost directly attributable to sales.

The share offer price represented a discount of 34.64% over its latest audited net tangible assets (NTA) per share while the average premium of the offer price over the last audited NTA in MGO (wholly cash settled) over the last 12 months was 23.56%.

For the past five financial years ended Dec 31, KJB’s NTA per share ranged from RM1.33 to RM1.77.

Meanwhile, the Naza group, most known for its automotive business, is moving aggressively into the hotel sector and plans to expand its portfolio to include four- and five-star as well as boutique hotels.

Each category will be branded differently albeit under the Naza umbrella. Currently, the division has a hotel each in Penang, Johor Baru and Malacca, opened in the last six years. The Naza hotels are rated three- and four-star, and have around 130 rooms each.

The group also holds the franchise to operate Howard Johnson Torrance and the Crowne Plaza Hotel in San Pedro, Los Angeles, in the US.

The hotel division makes less than RM4 million in revenue currently, but expects it to increase to RM6 million next year before growing in double digits.

It hopes to have a few more hotels in our stable in the next three to five years. They will open a fourth Naza Talyya Hotel in the Klang Valley by year-end (2009).