In Malaysia, selling off business assets is not very often heard of. Some Malaysian companies that practice divesting of business assets are  Berjaya  /Hong Leong group who takes profit not only from trading within its core business but includes the divestment of any business assets re: investment in associates/subsidiaries.

So do we really have a concern here? Well,actually no, merely that for the entrepreneur who is divesting, there is the quick buck to be made while for the employees working in one of those companies being divested, the agony of suddenly being informed on one morning your employer has deserted you!As a public listed company, there is the increasingly pressure to maintain or to grow profits, which in turn might lead to an increasing trend in the divesting of its non-core business to raise quick cash to buy other concern and other reasons..

Recently, we saw two cases which involved two conglomerates:

Sime Darby Bhd:

Agreed to sell its 29.3% stake in Jaya Holdings Ltd for RM701.5mil cash, and reap a profit of RM452mil after just a year’s ownership of the Singapore-listed company.

(Jaya builds offshore vessels and owns a fleet of such vessels for hire.)

Reasons: Jaya is not a strategic part of its core businesses. Also seem that the disposal proceeds is meant to buy over/switched over to buying Ramunia Holdings Bhd, a deal that is still being negotiated. Ramunia, which has a total market value of just RM284mil, could come free for the group, even though it’s a small sum for Sime.  

Genting Bhd:

Announced that its Singapore-listed subsidiary Genting International plc would sell its 29.6% stake in London Clubs International plc to Harrah’s, a US-based casino group.and estimate to reap about RM618mil cash from the sale, and rake in a profit of about RM144mil, also after a relatively short period of investment.

Reason: Genting said that after the sale, it would focus on the growth of Stanley Leisure plc, reputedly the largest casino operator in Britain.  A part of that planned growth could be financed from the profit of the London Clubs sale.

The story line here is  like if we wants to look at maintainable profit as total earnings from core and disposal of non-core business we then need to look at it like a portfolio of shares wherein there will be the need to switch from one non-core business to a more fitting business that can complements the group. Sound inhuman but many might construe that as real business.
 

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