KUALA LUMPUR: OSK Holdings Bhd, which is in the midst of merging its investment bank with RHB Capital Bhd, will possibly look for a new core business upon completion of the current merger deal with RHB.

“Our focus is ensure that the deal is completed,'' said Tan Sri Ong Leong Huat, director of OSK Holdings.

The transaction, estimated to take another three months for completion, will result in, among other things, OSK Holdings having a 10% stake in an enlarged banking entity with revenue from investment and also commercial banking that can be equity accounted.

“We have to get the people integrated and let the business run in full swing. The investment we have put into RHB Cap is over RM1 billion and we have to ensure this gives us better returns ... that one plus one is four or five, not two.

“My family is already in other businesses. We have property development and management, hotels and manufacturing. Investment banking is just one of it,'' said Ong at a media briefing. As (the former) CEO of the investment bank, he could not get involved in other businesses but as a financier, he had to know how business works and how to create value for the clients.

Expressing concern over the sharp drop in the share price of OSK Holdings, he reckons in any merger and acquisition deal of this size, it was inevitable for a lot of assumptions to crop up.

“The big question is why is the OSK share price dropping?'' he asked, referring to assumptions that since OSK was selling off its jewel investment banking business, it could become a PN17 company with no more core business.

Since the deal is not yet completed, OSK cannot disclose the utilisation of the funds or assets arising from the deal.

We do have sufficient income to pay dividend as we have been paying all these years,'' says Ong.

Among other things. OSK Holdings has:

● rental income of RM10mil per annum

● OSK Capital's profit before tax at RM20mil.

● a 100% in OSK Capital, a capital financing business with book value of RM78.3mil as at March 31.

● property assets RM272.9mil

● cash of RM174.3mil from the merger deal involving a 10% stake in RHB Cap that is worth RM1.7 bil

● net assets of RM2.339bil

With a share base of 965 million shares, that would translate into a net asset value per share of RM2.43.

“The short term value does not reflect the true value of the shares,'' saysU Chen Hock, CEO of OSK Investment Bank.

“We manage the underlying business and extract as much value for the shareholders as possible. The current market value at of RM1.35/6 is a sharp discount of 44% to the net asset value of RM2.43.''

“It is left to the wisdom of investors to see value there, why we undertake this exercise, is it detrimental to the shareholders or beneficial?

“As far as we are concerned, we are running the business and deliver returns and value to the shareholders.

On whether there would be a special dividend, Ong says that can be decided only after the deal is completed, possibly in another three months.

“From the first day of listing on May 31, 1991, till today, OSK Holdings has been paying consistent dividends biannually.

“We preserve profits that we make in good times; even during the Asian financial crisis in 1997 and global financial crisis of 2008, we were paying dividends,'' says Ong.

OSK started with 80 million shares; today, it has over 950 million shares. Dividend-in-specie is also paid from two public other companies - OSK Ventures and OSK Property Holdings.

“Whatever we can pass back to the shareholders, we will do so but we cannot do a deal and then pass out everything as dividends and close the business.

“There's nothing wrong with the company; why should we pay out everything?

“When we stop the business, there is nothing we can use to build up the company.

“Now with the assets, cash and other components of the business, we can leverage on those assets and continue to do good business.

“The board of directors comprise very experienced people, the record speaks for itself that we know how to do business.''

In terms of the merger deal with RHB Cap, Ong said: “It was thought through as value creation deal which would create a bigger talent pool.

“Our specialisation is in small and mid-cap businesses.

“As a standalone organisation, we can grow faster; we do not have a big balance sheet and that limits the facilities that we can grant.

“Our clients have outgrown our capability to serve them and we want to continue growing with the bigger ones. That is where we see the value enhancement of the merger deal to all stakeholders.

“Our staff are also excited to do bigger deals.''

By Yap Leng Kuen