TAN Sri Ong Leong Huat is known to many in the corporate world, having delved into numerous businesses over the years since buying the OSK group back in 1985.
But leading up to October last year, Ong has been working behind the scenes to set in motion one of his biggest corporate exercises – one that would mark a new milestone for the group.
Ong speaks candidly about the deal in an interview with StarBizWeek. Below are excerpts of the interview:
The property sector is currently facing headwinds from oversupply, tightening of bank loans, and investors taking a wait-and-see approach due to economic uncertainties. Should OSK Holdings have waited for the issues to simmer down before undertaking this merger?
It is partly because we see that the property cycle is turning that we have embarked on this merger exercise.
This merger enables PJD and OSK Prop to benefit from a stronger and larger balance sheet of OSK Holdings. If both companies become part of OSK Holdings, they will be able to use the resources of OSK Holdings to strengthen their businesses.
We have taken a long term view to grow our business in the property sector, as well as diversify into property investment, which is more stable.
We will also develop our business in Australia, to reduce reliance on the Malaysian market.
Diversifying into property investments and growing our business overseas requires a much stronger balance sheet than what we have today in PJD and OSK Property.
That is why OSK Holdings has to come into the picture to strengthen our financial capabilities and prepare for more challenging times in the market ahead.
Some believe that one of the reasons behind this merger exercise was for you to gain more control over the 10% stake in RHB Capital Bhd. Is this true?
We certainly do feel that OSK Holdings is undervalued, but the exercise is no means a single-faceted exercise to gain more control over our stake in RHB Capital Bhd. OSK Holdings also has a portfolio of valuable properties, including two properties along Jalan Ampang.
The truth is, all three companies are undervalued, and the best way to unlock value in them is by merging them to create a larger company and a more liquid stock.
Did the fall out of the mega-bank merger between RHB Cap, CIMB Group and Malaysia Building Society Bhd have any bearing on OSK Holdings’ decision to carry out this mega property merger?
We view our own corporate exercise as being independent of that transaction.
What is OSK Holdings’ long-term plans with the 10% stake in RHB Cap? Will it be sold if the price is right?
We will do what is necessary to deliver good returns to our shareholders over the long term.
Over the years, we have sold off businesses at good valuations to facilitate the enhancement of shareholder returns and to re-position the company to remain competitive in whatever business that we do.
Having said that, the investment in RHB Cap is very valuable to us. We see more potential for value creation in RHB Group and we do not have any intention of selling the stake at this juncture.
It seems to us that OSK Holdings is in a good position to benefit from the dividends from the RHB Cap stake, which can be deployed to fund property development projects. Can you elaborate on this, and how else would you use the dividends?
Over the past 2½ years since we made our investment into RHB Cap, we have opted to receive shares from RHB’s Dividend Reinvestment Plan. As a result, we have not been receiving cash earnings from our stake in RHB. We will carefully evaluate which option we should take for the company as we move forward.
You have previously attempted to privatise OSK Holdings and OSK Ventures. Would this be something you would consider doing again?
While we cannot rule out any possibility, there are no plans for such an exercise for now.
Our focus for the time being is to complete our merger among OSK Holdings, PJD and OSK Prop, and to extract as much value as possible for our shareholders from the merged and enlarged entity.
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