Melewar Bids for RM2.2 Billion Monorail Project!

Published on Star Biz on June 7th 2007.

• Thursday June 7, 2007
  
  Melewar’s investment in Aussie miner’s shares up seven-fold
  
  By C.S TAN
  
  PETALING JAYA: Melewar Industrial Group Bhd’s investment in an iron ore mining company in Western Australia has turned into a “gold mine”.
  
  The company made an initial investment in Gindalbie Metals Ltd in 2004 and subscribed to more shares last year. Its average cost in Gindalbie is 10 Australian cents a share and the price has surged seven times, or a seven bagger in stock market terminology. Gindalbie closed at 79.5 Australian cents on the Australian Securities Exchange yesterday.
  
  Gindalbie's price received a boost after the company signed on Monday a share subscription agreement with China’s Anshan Iron & Steel Group Corp (AnSteel), which would subscribe to a 12.9% stake in the Australian firm, Melewar chief operating officer Datuk K. C. Lim told StarBiz yesterday.
  
  Gindalbie rose from 70 cents on the news early this week. AnSteel is reputedly the second largest steel producer in China. The news may also be a reason for the recent interest in Melewar shares.
  
  It is not widely known, however, that there is a Malaysian listed company that has a substantial interest in an iron ore mining firm in Australia.
  
  Currently, Melewar is Gindalbie’s single largest shareholder with a 17.2% stake although that would be diluted to about 14.5% after the mining company makes a placement of shares to AnSteel.
  
  Melewar’s stake in Gindalbie is worth about RM165mil. That, in turn, works out to be worth 72 sen a share in Melewar, which closed at RM1.19 yesterday.
  
  It also means Melewar shares were valued at just 47 sen each for the rest of its businesses which include wholly-owned subsidiaries Melewar Steel Tube Sdn Bhd and Melewar Steel Mills Sdn Bhd, and stakes in listed companies, namely 52.4% of Mycron Steel Bhd and 21.5% of M3nergy Bhd.
  
  Melewar stated in its annual report last year that its steel manufacturing division had net assets of over RM380mil. The reason investors overlooked the value in Melewar could be its uneven track record and their focus on larger steel companies.
  
  The group has started to get noticed. M3nergy shared surged to limit up on Tuesday afternoon. Following a query from Bursa Malaysia, M3nergy said yesterday there were no material developments.
  
  The interest in M3nergy could be investors’ discovery that the company is rich in oil and gas (O&G) assets. It owns a floating, production, storage and offloading (FPSO) facility; a floating, storage and offloading (FSO) facility; and net cash of more than RM54mil. M3nergy had net assets per share of RM3.30 against its share price of RM1.44 yesterday.
  
  It is unusual for the shares in an O&G company to trade below its net assets. Besides its assets, M3nergy has agreements for production sharing contracts to develop marginal oil fields in Indonesia and India.
  
  The FPSO and FSO facilities have been profitable from day one of M3nergy's investment. The company’s operating profit from O&G services amounted to RM30.8mil for the 15 months to March 31, 2007.
  
  Melewar COO Lim said the company's directors decided three years ago to invest in Gindalbie when they saw steel prices rising. Eventually, it is intended the Gindalbie shares would be sold. “We’re not mining experts,” he said.
  
  As to the timing of sale, he said: “It has not reached our target price.”
  
  Gindalbie was exploring for gold when it discovered a lot of iron ore deposits on a small section of its land. The company has not started to produce iron ore yet but the A$39mil (RM109mil) to be raised from the share placement to AnSteel would ensure that it has sufficient funds to develop the mine.
  
  The Australian miner would start to bring up the iron ore at the end of the year or early 2008. “We should see a better value in the Gindalbie shares at that time,” Lim said.
  
  Furthermore, Gindalbie could become a takeover target of the global mining giants.

Such bullish comments made on the stock surely had huge positive impact on the stock. And rallied it did.

• 10-07-2007: Melewar hits 52-week high
  
  Melewar Industrial Group Bhd's share price closed 15 sen higher to a 52-week high of RM1.67 yesterday, rising in tandem with its Australian investment Gindalbie Metals Ltd, which rose 17.5 cents to A$1.37 (RM4.05).
  
  The share prices and trading volumes of Melewar Industrial and Gindalbie have risen sharply since a report last Friday that Melewar's stake in the Australian outfit was worth RM165 million. Melewar owns 17.2% of Gindalbie.
  
  Yesterday, there were 12.77 million Melewar shares traded on Bursa Malaysia. Gindalbie saw 15.29 million shares done on the Australian Stock Exchange. TA Securities Research maintained its "buy" on Melewar with a target price of RM2.70, adding that its Gindalbie investment, based on last Friday's closing of A$1.20, was worth RM266 million or RM1.17 per share.
  
  "The group is committed to 50% payout of its net profit as well as 50% dividend received from listed subsidiaries or associates. Based on our earnings estimates, we are looking for the group to declare a gross dividend per share of 12 sen in FY08, which translates into a dividend yield of 7.9%."

December 13th 2007, Melewar, Putera Capital bid for Penang monorail project

• Melewar, Putera Capital bid for Penang monorail project
  
  The monorail project is believed to be worth more than the estimated RM1.6 billion for the previous proposed monorail job
  
  By Hamisah Hamid Published: 2007/12/13
  
  A CONSORTIUM comprising Melewar Industrial Group Bhd (MIG) and Putera Capital Bhd last month submitted a bid to design, build and operate the Penang monorail system.
  
  The bid was submitted on the closing date of the tender, November 14.
  
  The monorail project is believed to be worth more than the estimated RM1.6 billion for the previous proposed monorail job.
  
  MIG managing director and chief executive officer Tunku Ya'acob Tunku Abdullah said the RM1.6 billion was the estimated cost for the proposed loop system.
  
  "The loop involves one line only, so it is cheaper. Now the project involves longer route and double-track. Of course, it will be more than RM1.6 billion," he told a news conference after the signing of a strategic cooperation agreement between MIG's wholly-owned subsidiary Melewar Metro Sdn Bhd and Putera Capital in Kuala Lumpur yesterday.
  
  Also present were Melewar Integrated Engineering Sdn Bhd chief executive officer Uwe Ahrens, Putera Capital chief executive officer Wan Azman Wan Salleh and Putera Capital director Kamil A Rahman.
  
  The signing of the memorandum of understanding is a prelude to cooperation between both parties in the proposed Penang monorail project. Melewar Metro submitted its bid through Melewar Metro (Penang) Sdn Bhd (MMP).
  
  Both parties have also agreed to sign a share sale agreement later on the acquisition of a stake in MMP, where Putera Capital would acquire 20 per cent of MMP.
  
  The previous proposed Penang monorail project was based on private funding initiative. This time around, the government, through Syarikat Prasarana Negara Bhd, will provide the funding, and the private sector has been asked to submit tenders as contractors of the project.
  
  Steel maker MIG and civil and structural expert Putera Capital are confident that their consortium would win the bid for the Penang monorail job.
  
  However, they were tightlipped about the cost of their proposed bid.

Do note that Putera Capital does not have a good track record (here is Putera's latest Quarterly rpt on consolidated results for the financial period ended 30/11/2007 ) and is a PN 17 stock. Hard to imagine that Melewar could pull a billion dollar project off with Putera Capital.

And then came trouble. Uncertainty looms over Melewar’s pledged shares in Aussie miner

• KUALA LUMPUR: Melewar Industrial Group Bhd could be negatively affected by the collapse of Australian stockbroker Opes Prime.
  
  Melewar’s wholly owned subsidiary Melewar Steel Ventures (MSV) had pledged 35.1 million shares or 6.8% Gindalbie Metals Ltd (“Gindalbie”) to Opes Prime Stockbroking to secure a loan from the latter. Now that receivers have been appointed for Opes, the status of the Gindalbie Metals shares is uncertain.
  
  In October last year, MSV took out an A$24 million (RM69.77 million) loan from Opes, of which A$11.1 million are still outstanding.
  
  MSV is Gindalbie’s largest shareholder with a 14% stake in the iron ore miner and has a representative on the board. Melewar acquired the Gindalbie shares in 2004 for an average cost of a mere A$0.10 per share. Thanks to strong iron ore prices, Gindalbie’s shares have risen since then, even hitting a high of A$1.82 last September. At its last traded price of A$0.71 per share, Melewar’s block of pledged Gindalbie’s shares has a market value of A$25 million (RM72 million).
  
  According to Melewar’s statement to Bursa, Opes had appointed a voluntary administrator to look into the affairs of Opes. It was reported in Australia’s Herald Sun yesterday that Opes Prime Group, Opes Prime Stockbroking, Leveraged Capital and Hawkswood Investments were placed in the hands of receivers Chris Campbell and Sal Algeri of Deloitte Corporate Reorganisation Group last Thursday after trading “irregularities” were uncovered.
  
  Following the appointment of the voluntary administrator, Melewar said a secured creditor ANZ appointed receivers and managers in respect of the Opes Group while the Australian Securities and Investments Commission has also formed a special team to investigate whether there are any potential breaches of the Corporations Act by the Opes Group.
  
  Melewar said it is seeking legal advice on this matter.
  
  Gindalbie said in a release to the Australian Securities Exchange on Monday that it was seeking clarification of Melewar’s position and requested for a trading halt for 48 hours. It will be open for trading tomorrow. The stock was down 8.97% to A$0.71 when it last traded on Friday compared to the day before. Melewar’s stock is down 7% to 96.5 sen yesterday compared to RM1.04 on Friday.
  
  Reports in Australia have indicated that Opes is known for its willingness to accept collateral in the form of shares of non-blue chip companies.
  
  According to the Herald Sun, the receivers and managers of Opes say they are not in a position yet to advise the clients of Opes as to whether any money will be returned to them. “The position regarding Opes Prime Stockbroking Ltd client accounts remains unclear and will take some time to reconcile,” the receivers were quoted as saying in the Australian daily newspaper.

Of course, Melewar felt unjust.

• Melewar gets court order to stop Opes stake sale
  
  Published: 2008/04/03
  
  MELEWAR Industrial Group Bhd has obtained a court order to stop a creditor of Opes Prime Stockbrocking Ltd from selling part of its shares in an Australian iron ore miner.
  
  The hearing has been fixed for April 10, it told Bursa Malaysia yesterday.

What this means was..

• 03-04-2008: Melewar faces RM38m potential loss
  by Joyce Goh
  
  KUALA LUMPUR: Melewar Industrial Group Bhd said yesterday it could suffer a potential RM38 million loss, should it fail to recover a block of shares in Australian-listed Gindalbie Metals Ltd that it had pledged with Opes Prime Stockbroking Ltd.
  
  Opes is facing liquidation and a secured lender to Opes is planning on selling the holdings of Opes, which include 32 million Gindalbie shares that Melewar’s unit Melewar Steel Ventures (MSV) had pledged to Opes last year for an A$24 million (RM69.67 million) loan.
  
  The potential RM38 million loss was arrived at after taking into account the fact that MSV had already drawn down more than half of that loan.
  
  MSV had pledged a total of 35.1 million Gindalbie shares with Opes but its secured lenders are only claiming 32 million of those shares.
  
  “…should MSV incur the loss, MSV would have the right to claim for the loss from Opes,” Melewar added.
  
  To protect its interest in the Gindalbie shares, Melewar has also obtained a temporary court injunction to stop the secured lender to Opes from selling the pledged Gindalbie shares. The hearing for the case is fixed for April 10, 2008.
  
  Yesterday, four other borrowers of Opes had filed for injunctions seeking to stop secured creditors of Opes from selling shares they also had pledged to Opes.
  
  MSV is Gindalbie’s largest shareholder with a 14.6% stake in the iron ore miner. Melewar acquired the Gindalbie shares in 2004 for an average cost of a mere A$0.10 per share. Thanks to strong iron ore prices, Gindalbie’s shares have risen since then, even hitting a high of A$1.82 last September. The stock is now trading at A$0.72 after resuming trading following a two-day suspension in light of the Opes crisis.
  
  According to Gindalbie, Melewar has no intention of selling its remaining 7.6% stake in Gindalbie. Melewar has yet to respond to queries from The Edge.
  
  The total book value of the entire Gindalbie shares held by MSV recorded in the latest audited accounts of Melewar for the financial year ended June 30, 2007, is approximately RM123 million.
  
  For FY2007, Melewar’s capital gains from its Gindalbie shares was recorded in the former’s stellar profits. The Gindalbie capital gains contributed a whopping RM140.1 million in profit. Melewar stated in its 2007 annual report that the board was happy to report these gains but added that it “prudently highlights that these gains have not as yet been realised, through the sale of Gindalbie shares

On Saturday, April 19th 2008

• Saturday April 19, 2008
  
  Court rejects Melewar’s appeal
  
  PETALING JAYA: Melewar Industrial Group Bhd’s attempt to stop the sale of its shares in Gindalbie Metals Ltd suffered another setback after its appeal was rejected by the Court of Appeal in Sydney yesterday.
  
  The company had filed an appeal against a ruling made by the Supreme Court in Sydney on Wednesday, which had dissolved its injunction against ANZ Banking Group Ltd. The injunction was to prevent ANZ from selling Melewar's shares in Gindalbie.
  
  The company had on March 31 announced that a wholly-owned subsidiary had pledged a 6.8% stake in Gindalbie against an outstanding loan of A$1.1mil from Opes Prime Stockbroking Ltd (OPS).
  
  However, ANZ, a secured creditor of Opes, appointed receivers and managers for the Opes group.
  
  Melewar said in a filing with Bursa Malaysia yesterday it would file a claim against ANZ for the return of the 32 million Gindalbie shares to the company.
  
  Melewar also said the failure to recover the 32 million Gindalbie shares pledged with OPS would result in the loss of about RM38mil.

And today, Melewar made a huge statement on the press, Melewar submits RM2.2b monorail plan

• Melewar submits RM2.2b monorail plan
  
  By Marina Emmanuel Published: 2008/04/23
  
  The proposed system for George Town, Penang, will boast a 12-car train of monorail and can move 17,600 passengers per hour
  
  MELEWAR Industrial Group (MIG) Bhd has presented to the Penang state government a proposal for a RM2.2 billion monorail system for George Town.
  
  The proposed ultra-light loop monorail system covering a 52km track is set to operate on a single line and run on three different loops from locations like Gelugor, Farlim in Air Itam and Gurney Drive into the city.
  
  “The focus of the main link will be the centre of George Town and we strongly believe that the federal government and state government will work together in bringing a monorail system to Penang,” Melewar Industrial Group’s managing director and chief executive officer Tunku Datuk Yaacob Tunku Abdullah told reporters after presenting the proposal to Chief Minister Lim Guan Eng and members of the state executive council yesterday at Lim’s office.
  
  He said the proposed system, which is aimed at moving people from point-to-point into the city, will boast a 12-car train of monorail and can move 17,600 passengers per hour.
  
  Tunku Yaacob said the company can take 28 months to complete the system which would feature steel structures.
  
  “Land acquisition can also be kept to a minimum because the monorail will be running on road dividers,” he added.
  
  When asked to comment on concerns from Penangites that a monorail would mar the charm of George Town’s historic inner city which is vying for a listing on the World Heritage List, Tunku Yaacob said:
  
  “We will not bring the monorail to heritage buildings ... we will not run it in front of the buildings but behind them.”
  
  However, an artist’s impression of the proposed monorail system for Penang provided by Melewar showed the system running alongside historic structures in the city.
  
  On postings in blogs that Penang should bring back its tram system instead of introducing a monorail, he described the tram concept as an interesting one but pointed out that the trams had not been successful.
  
  Last November, Melewar Industrial Group Bhd unit Melewar Metro Sdn Bhd (MMSB), which is vying for the estimated RM1.2 billion monorail project in Penang, announced that it had formed a consortium with Putera Capital Bhd to cooperate to jointly secure the project.
  
  Melewar Group had said in a statement that the consortium was formalised with the signing of a memorandum of understanding between MMSB’s wholly-owned subsidiary Melewar Metro (Penang) Sdn Bhd (MMP) and Putera Capital. MMSB made the proposal for the monorail project to the government via its subsidiary.
  
  Melewar is one of several parties which participated in a tender exercise for the development of a monorail system for Penang on November 14 last year which was called by Syarikat Prasarana Negara Berhad (SPNB).
  
  In January this year, SPNB awarded a letter of intent for the project to Malaysian Resources Corporation Bhd (MRCB), which has formed a consortium with Penang Port Sdn Bhd and Scomi Engineering Bhd.

WOW!

So it's now NO longer a 1.6 bil bid but a 2.2 bid.

And one cannot stop wondering the timing of it all. Just on Saturday it announced it lost a court appeal which means it will result a loss of 38 million to the company.

By the way, here is Melewar last reported earnings, Quarterly rpt on consolidated results for the financial period ended 31/12/2007.

Below is the snapshot of Melewar's balance sheet.

Time deposit: 3.509 million. Cash and bank balances: 26.733 million. Total: 30.242 million.

Short term borrowings: 322.373 million. Long term borrowings. 94.076 million. Total: 416.449 million.

Now this is where I am wondering. With such a balance sheet, if Melewar wins this BID, would it be able to finance this massive rm2.2 billion project?

Now what is even more interesting, this stock used to be known as Maruchi Steel Tubes. And this is one of the last quarterly earnings before the company was sold to Melewar Group. here

Look at he balance sheet.

What a nice balance sheet Maruichi had back then!