Keuro's rights

For those who have Keuro, be prepared to allow yourself some cash to pick up the rights. Basically it is a 3 for 4 rights at issued price of RM1.08 per share. This basically means that if you have 10,000 units of Keuro, you will be entitled to 7,500 (3/4 x 10,000) of the rights shares. That also means that at RM1.08, the amount of cash needed is 7,500 x RM1.08 = RM8,100. Call your remisier on how to pick up your rights. Also, the rights comes with warrants in which case the exercise price is fixed at RM1.18. Assuming the same rights amount of 7,500 is picked up, the number of warrants that will be provided is 3,750 units.

If you decided not to pick up the rights between 6 August to 12 August 2014, you have the option to sell your Keuro-OR. On those dates, the Keuro-OR will be traded and you will be allowed to buy or sell your rights options.

The Keuro's share will be traded ex-rights from 1 August 2014 onwards. This means its price will be adjusted accordingly based on the last traded price as at 31 July 2014 closing.

For me, I will definitely be picking up the rights and due to this, I have decided to sell some of the DKSH to pick up the shares.

Very recently, the update for Keuro it seems is that it will not be holding Talam Transform's shares and it is disposing part of its almost 30% shareholdings. I have blogged about the need to not hold Talam's shares as it is not the key business for Keuro. It seems that Tan Sri Chan Ah Chye is back into Talam with his son and daughter joining the board of Talam and to which Keuro sold some 230 million shares to the company related to Chan Ah Chye. The price sold is not a good price though i.e. below 10 cents.

While Talam's net book value (revised) is very good, I am not so sure with the old management back at the helm though as it has never been looked positively by property buyers before due to many broken promises in the pasts by the Talam group to its house buyers. In many cases, my mantra is to look upon the management that is supposed to carry the company forward.

IJM it seems is moving away from Talam as well with one of the JV which was planned on a piece of land in Gombak being terminated. However, IJM has gotten what it wanted i.e. the WCE and Rimbayu land.

Why selling Talam is a good thing for Keuro

As mentioned before, Keuro has 3 main assets - the West Coast Expressway, Rimbayu project in Selangor and a 30% shareholding in Talam. I would rate the value of the assets in a descending order i.e. WCE would worth a lot assuming the highway is widely used after the completion as it is the other alternative to PLUS between Klang Valley to Taiping. Rimbayu would be a very large project with now Keuro holding an associate stake with IJM developing it, while Talam is just an investment, although it may be worth more than what it is today (in my mind) as some of the assets are at book value which was not revalued for a long time.

Given the analogy of a sports team, if you are a team with some very good players, and some fringe, supporting players and the team will need to sell to grow, what do you think is the best way to go about it. Selling the supporting players, of course as the team would still need to grow around their very best players - and that is the case with Keuro.

It needs the money to grow. Talam will be worth some good money. The issue is how much would Keuro be selling them for assuming it is doing the right thing for its shareholders?

Talam and KEURO

Recently, we are seeing some interests in Talam Transform as it continues to reduce its debt by selling assets. In the process of selling its assets, it is realised that many of its assets are undervalued in its books. At as now the NA per share is about RM0.14 to RM0.15 per share (that is book value) and may not be real value.

I am sure after its cleaning of its books, we will be seeing some real projects, but probably not using the Talam brand.

Why am I interested in Talam? Keuro holds 30% (controlling) of the company.

Rebalancing portfolio

I have realised that over the past few months, DKSH has now comprised of more than 30% of the portfolio. As I am not going to pump in more cash into the fund, I have decided to sell 2000 units of DKSH and buy an additional 7500 units of Keuro.

If the proposal from Keuro maintains, 16,000 units of the shares in total will cause me to allocate some additional RM13k for the subscription of the rights - price not fixed yet. Yes, I am going to subscribe for the Keuro's rights as I am anticipating that it will be offered quite soon.

Over the last 2 months, Keuro has changed hands and Chan Ah Chye is no longer the substantial shareholder of the company he founded. Through that, Talam Transform is under a different control as well, in case some might not know.

Keuro now, has 2 major shareholders in the name of IJM and MWE - both equally around 25%. There are also some large shareholders whom are holding through foreign entities which we do not know. Keuro is a company which will need to raise funds to support its WCE project. As mentioned in my past articles, buying Keuro is a risk as it does not have much of a revenue and profit track record over the last few years as well as in the near future, except for the Rimbayu project.

I am betting that at its market cap of around RM720 million, it should be worth much more upon the completion of West Coast Expressway (WCE). All in all, this is a stock for the long haul and will be very dependent on WCE.

Talam's reply on claims

Something light to read. Do not want to think too much on Friday, but let's look at the press statement by Talam (Trinity) on the battle between MCA and Selangor State Government. Just wondering why is Talam so harsh on its statement. Remember Talam was no "Saint" at all as they caused quite a lot of home buyers loss "almost" all their savings. Personally I have known quite a few. Just drive around and look at the projects that Talam had abandoned. Are they dependent on the state to get away from all their misdoings?

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Read my other article on this.

My two cents on Talam and Selangor State Government deal

Talam (Trinity today) was in a big mess and is still in a big mess today. Before the deal with the Selangor State Government, Talam had over RM2 billion in debt and trade payables whereas its receivables and cash was less than RM280 million. Based on that number, for someone who knows will realize that even if you sue the company, not much can be squeezed out of the company. You would not want to carry your proceedings till the company is under liquidation as that would have woken up all the other creditors.

You would want to privately negotiate, find a solution which both parties could have agreed to and walk away. I think that was what the Selangor state government was negotiating into. The state can't get back cash from Talam as this is the asset which the developer does not have. The only thing Talam has plenty is land and I would think because of the situation it was in, most of these land would probably be encumbered. While I do not like the takeover of the debt from Talam, I think the state government probably had no choice but to accept land partly encumbered. This was a deal which I would go for myself rather than dragging the case for long and not solvable.

Think of this - Today after 2 years the deal was completed, Talam still has over RM1.3 billion of debt and less than RM20 million cash. You think they would be able to pay despite all the legal demand etc.? The best solution is getting some land away from the company as they have plenty. After all it is the state government which gets back their land in their own state.

As for the claim by MCA that the deal allowed Talam to regularize back its PN17 status, well read below, which was announced before the deal with the state was announced.

Whereas, for the claim that the land gotten from Talam was overvalued, well that would be a bit difficult to proof isn't it as it can be quite subjective especially when the amount disputed was RM20,000 per acre.

Basically, this deal is there's no point suing a bankrupt person for bankruptcy - Talam was not bankrupt yet, but it was cashless.

On the other hand, if you really think of it, the party that was smart was Talam, which is what MCA claimed. They are correct here at least.