Sanbumi/Permaju

In Dec 2011, Permaju’s major shareholder Datuk Chua Tiong Moon has been building up a sizeable stake leading to speculation that this may lead to an alliance between the two companies. Both Sanbumi and Permaju share a common business interest in timber and both companies are loss-making;

In Sept 2010, GM is conducting a review of its operations and business in Malaysia and in the centre of talks is the business relationship with DRB-HICOM via HICOM-Chevrolet Sdn Bhd. One report indicated a decision might have been made with current Chevy 3S dealer Cergazam Sdn Bhd, a company owned by timber company Permaju Industries Bhd, with Cergazam taking over distribution operations until a full-time partner could be found;

· In Jan 2009, loss-making Permaju Industries Bhd’s diversification into the retail car market in 2007 after the cessation of its timber-related business.The Sabah-based company’s diversification includes distribution of vehicles and providing related services under its unit Cergazam Sdn Bhd, which was appointed an authorised retailer for Chevrolet vehicles

Dated Dec 2011

Permaju’s major shareholder has been building up a sizeable stake leading to speculation that this may lead to an alliance between the two companies. Both Sanbumi and Permaju share a common business interest in timber and both companies are loss-making.

On Nov 29 2011, Sanbumi managing director Datuk Chua Tiong Moon bought an additional 3.63 million shares in Permaju at 29 sen a piece for RM1.05 million in a married deal. This brought his total shareholdings to 12.99 million shares or a 6.91% stake in Permaju, making him the third largest shareholder behind brothers Tan Sri Chai Kin Kong and Datuk Chai Kin Loong, who have 10.95% and 7.35% direct stakes in the company respectively.

On Nov 30 2011, 4.5 million Permaju shares were exchanged in an off-market cross trade at the same price of 29 sen. These shares were sold by Kin Kong, Kin Loong and other family members. Permaju’s biggest shareholder Kin Kong had reduced his stake from 13.7% on April 22 to 10.94%, and on Sept 28 2011 selling most of the 7.64 million shares in the open market. Kin Kong also disposed of 2.9 million Sanbumi shares, reducing his stake to 4.99% with a total of 8.694 million shares.

It appears that Chua has been building up his stake in Permaju, possibly buying up the Chai brothers’ shares. It is unclear what Chua’s motive is, although there could be a synergy between the two companies’ timber businesses.

Permaju and Sanbumi have a market capitalisation of RM58.78 million and RM47.31 million respectively.

Permaju has two core businesses in timber and automotive. While Permaju’s timber segment accounted for a majority of the group’s assets, its automotive division contributed almost 10 times the revenue compared with timber.

Permaju’s timber business which has 59.41% of the group’s assets at RM140.84 million only contributed RM14.09 million in revenue or 8.94% of their full-year revenue ended Dec 31, 2010. The timber segment incurred a loss of RM5.35 million overall.

Its automotive segment which contributed 90.98% of its 2010 revenue, accounted for 46.44% of the group’s total assets in the same period.
Permaju executive chairman Datuk Rahadian Mahmud Mohammad Khalil said that the group’s timber log trading activity is to be further rationalised and to cease if the trading environment remains unhealthy.

Permaju has RM16.96 million worth of timber concession rights in Pahang and Kelantan and Sanbumi’s principal activities through its subsidiaries are saw milling, manufacture of downstream timber products, timber log and timber product trading.

For the group’s 3Q results ended Sept 30, Permaju incurred losses of RM5.02 million, with its timber business offering weak revenue return to assets.

The timber business which has RM123.24 million in assets or 53.54% of the group’s total assets only contributed RM4.75 million in revenue or 3.72% of the group’s total for the quarter and incurred an overall loss of RM276,000.

In the same quarter, Permaju’s automotive segment with RM114.06 million in assets (49.54% of total assets) contributed RM122.66 million to the group’s top line or 96.19% of total revenue with a loss of RM2.26 million.

Sanbumi chalked up net losses of RM5.24 million for the nine months to Sept 30.

Dated September 2009 …

DRB-HICOM Bhd has made a pitch to GM about jointly conducting completely-knocked-down (CKD) operations in the country.

Market sources said the prospects of doing local assembly for GM would be beneficial to future sales as locally assembled cars would be cheaper.

GM is conducting a review of its operations and business in Malaysia and in the centre of talks is the business relationship with DRB-HICOM via HICOM-Chevrolet Sdn Bhd.

One report indicated a decision might have been made with current Chevy 3S dealer Cergazam Sdn Bhd, a company owned by timber company Permaju Industries Bhd, with Cergazam taking over distribution operations until a full-time partner could be found.

The seeming breakdown in the relationship between GM and DRB-HICOM is somewhat puzzling as the latter has had a long and fruitful relationship with other vehicle manufacturers in the country.

Dated Jan 2009

Loss-making Permaju Industries Bhd’s diversification into the retail car market in 2007 after the cessation of its timber-related business.

The Sabah-based company’s diversification includes distribution of vehicles and providing related services under its unit Cergazam Sdn Bhd, which was appointed an authorised retailer for Chevrolet vehicles.

The retailer agreements, which are renewed annually, will expire on Dec 31 2009.

However, Chevrolet retains the rights to sell vehicles directly or indirectly in Malaysia and appoint retailers in the country.

Cergazam has showrooms in Petaling Jaya, Bukit Mertajam, Johor Baru and George Town . On Aug 25 2008, Permaju approved RM40mil to Cergazam and TP Auto Sdn Bhd, which sells imported used luxury cars.

The proposed diversification is expected to incur losses of about RM2mil for the financial year ended Dec 31 (FY08) mainly due to it being its first year in operations and lower sales forecast resulting from the unfavourable economic condition and volatile oil prices.

The company acknowledges it may face direct competition from new and existing players in the industry and price competition.

It has targeted for motor vehicle distribution and related services to contribute 25% of more of the net profit for FY10.

Financial Results …

Permaju posted net loss of RM941,000 in the nine months ended Sept 30. For FY07 its net loss was RM37.06mil due to lower sales of logs and provision for impairment loss on property, plant and equipment of RM19.08mil. This is a sharp contrast to the net profit of RM16.67mil in 2006.