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What in effect Pernas is doing is transferring some of its assets to the MBO team via PIHP and not directly to them.This option enable the Mbo team to raise funds through the stock market. Pernas will increase its stake in PIHP from 56 per cent to 75.6 per cent following the asset injection. It will then divest this entire stake to a senior executive team headed by Tunku Shahriman (32 per cent), bumiputera institutions (32 per cent), PIHP minority shareholders and the public (7.3 per cent, and Pernas employees (5 per cent). PIHP minority shareholders thus have to split the 49 million shares with the public, the quantum of which has yet to be worked out. It is envisaged that PIHP minor-ity shareholders will receive a one-for-10 restricted offer. Minorities will also have a chance to participate in the company?fs RM280 million bond issue with 134.6 million warrants. This will help PIHP raise part of the RM545.6 million needed to pay Pernas. How will the four mem-bers of the MBO team finance their acquisition of the 32 per cent stake? The amount is by no means small. Assuming the 215 million PIHP shares are offered to them at RM2 each, the cost will come up to no less than RM430 million. Market sources say one op-tion would be for the MBO team to pledge the shares through a margin financing scheme.It PIHP?fs market price continues to remain above RM3.0O, there should be no problem, they say. But will the share price remain strong? Says an analyst, ?eThe stock still has some upside to it. It appears to be a good deal for PIHP shareholders as the three listed companies themselves would amount to RM1 billion.?f At current levels of around RM2.70, the stock is trading at a historical price earn-ings multiple of 27 times. Most analysts are unable to make an accurate forecast as no figures are available on the income potential of the assets to be acquired. However, one broking firm has forecast a group net profit of RM105 million for PIHP for its FY Jan 31,1997. It forecast that this would come from PIHP?fs existing businesses (RM60 million) and from the assets to be acquired (RM100 million). Based on an enlarged share capital of RM672.8 million, this would work out to 15.6 sen per share or a prospective PE multiple of 17.6 times 1997 earnings. That is why analysts feel the share has upside potential. Wisely, the government has decided against privatising Pernas as a whole but rather only part of its assets. Thus Pernas will be left to continue with its main task of assisting the bumiputera community. It turned in a pre-tax profit of RM178.6 million for its 1995 FY-end (seechart) To completely privatise Pernas would have been a daunting task. Figures in its 1995 annual report reveal that the group?fs fixed assets alone have a net book value of RM2.701 billion as at Jan 31, 1995. Equally daunting is its long-term borrowings RM1.473 billion and short-term borrowing of RM714.17 billion. Meanwhile, Rating Agency Malaysia Berhad (RAM) has placed PIHP?fs bonds on Rating Watch pending an assessment of the latest developments. It says although the RM200 million mortgage bond issue is secured by a first legal charge over the KL Hilton, the latest proposals will require PIHP to take on more debt in change for assets. ?eIn addition, the impact of PIHP?fs financial flexibility, which was an important factor in the initial rating exercise, needs to he reviewed, RAM says. In December 1994 RAM had assigned stand alone rating of AA3 for PIHP?fs RM200 million redeemable mortgage bonds (1995/2000 ).
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