BEST SMALL CAP COMPANY
KPJ Healthcare
Healthcare is a growing business in Malaysia and Southeast Asia in general, as incomes rise and people become more concerned with their health. Few companies have been as good at taking advantage of it as KPJ Healthcare.
The company, which is a member of the Johor Corp. Group, is a specialist hospital buyer and outfitter, taking aging facilities and updating and specialising them for a profit. It has accumulated a portfolio of 22 private specialist hospitals in Malaysia alone, adding three brown-field hospitals this year, KPJ Medika in July, Sabah Medical in August and Sri Manjung Specialist in September. J.P. Morgan said in a research note that it expects the three hospitals to be earnings accretive within a year.
The company is growing beyond its home country’s borders too, owning two hospitals in Indonesia, and announcing on November 29 that it had purchased a stake in 23% stake in the othopaedic specialising Vejthani Hospital in Bangkok, Thailand for MYR63 million. The purchase fits well with KPJ’s plans, which include building its exposure to medical tourism to 25% by 2020.
KPJ tends to inject the hospitals it acquires into the Aqar Reit, in which it holds a roughly 50% market share. Doing so gives it money to fuel its expansion.
The company is not averse to building its own new hospitals either, as evidenced by its subsidiary Renalcare Perubatan’s proposed acquisition of a piece of commercial land in Mukim Tebrau, Johor Baharu for MYR45 million, upon which it wants to build a 150-bed hospital for MYR100 million.
“KPJ Healthcare has been expanding by either building or acquiring new hospitals at the rate of two a year to expand private healthcare,” notes one Kuala Lumpur-based analyst. “They have specialised in acquiring loss-making general hospitals and converting them to specialist hospitals. It’s been a very successful strategy.”
Investors have been fans too. KPJ’s share price has risen from MYR4,640 on January 3, 2012 to MYR5,900 on December 3.
BEST MEDIUM CAP COMPANY
Hartalega Holdings
Synthetic rubber glove maker Hartalega is admired by analysts for its drive to expand, and the success that it has had taking on traditional industry leader Top Glove.
“It’s a major feat; Top Glove was ahead [in terms of market value and production] for ages and then out of the blue Hartalega matched and exceeded it marginally by taking a completely different R&D (research and design) strategy and going into nitrile when everybody else was going into latex,” says a head of equity research at a leading local brokerage.
Nitrile, a byproduct of crude oil, costs less than the rubber than is the raw material for latex gloves, helping Hartalega to book better profit margins than its rivals. It has exploited this advantage, rapidly expanding over the past five years to become the world’s largest producer of nitrile gloves, making 10 billion pieces annually.
At the same time Hartalega has enjoyed some impressive financial performance. The company reported that its quarterly net income between June and September in 2012 rose 26.8% over the same period in 2011 to MYR58.57 million, while revenues grew from MYR229.54 million to MYR255.01 million.
The company’s get up and go has been noticed by many investors, with its shares trading to MYR4,780 on November 29, a shade under its record high of MYR5,010 on November 12 and an increase of nearly 80% over the past 12 months. Hartalega’s stock is so popular that it’s hard for investors to get hold of it.
The key now is for the company to continue to perform under a new generation of leadership. Founder Kuan Kam Hon handed over his role as managing director to his son Kuan Mun Leong in mid-November, although he is retaining his role as executive chairman.
BEST LARGE CAP COMPANY
Malayan Banking (Maybank)
Malaysia’s largest banking group by assets has not always been its most nimble – that title has tended to fall to CIMB Group of late. But nobody can accuse Malayan Banking of not learning from its arch-rival.
Over the past year it has deliberately implemented strategies similar to those of CIMB, building its corporate and investment banking capabilities while expanding internationally.
The impact has been impressive. Maybank reported a 12.9% rise in its third quarter net profit to MYR1.5 billion, beating market expectations. A combination of better-than-expected net interest income and low loan loss provisions helped to account for the surprisingly good performance. This ensured that its nine-month net profit hit MYR4.3 billion, 18.2% higher than the same period in 2011. Its share price has benefited from the strong performance, rising from MYR8,340 on January 3 to MYR9,060 on December 3.
Observers largely credit the performance to Mayank’s relatively young board. “The board of directors is far younger than that of CIMB, they are aggressive and basically copying what CIMB did,” says the head of equity research at one local bank. “That includes business lines, but also sponsoring sporting events and star sportsmen to raise the bank’s profile, while conducting aggressive lending at a time when other banks are a bit more conservative. As a result Maybank has been gaining market share.”
One example of this increased assertiveness occurred in November, when the lender led a consortium of banks in lending US$900 million to Genting Hong Kong and a further US$250 million to Travellers International Hotel Group.
Meanwhile Maybank’s acquisition of Kim Eng Securities, which was finalised on December 14, 2011, has enabled the bank to offer broking and capital markets capabilities, which in turn has bolstered its private banking efforts.
The bank isn’t just pursuing the flashy parts of banking. On November 21 Maybank announced the introduction of a regional cash management system to take advantage of the rising need for cash and treasury services as Southeast Asian economies continue to expand. Maybank intends to use the system to grow across the region, as it already boasts a 40% market share for transaction volume at home.
BEST EXECUTIVE
Nazir Razak, CEO, CIMB
Ask analysts and investors about the most impressive business executives in Malaysia and one name is bound to crop up: Nazir Razak.
He may be the brother of Malaysia’s prime minister, but over 20 years Razak has carved a reputation for himself as a canny investment banker and more recently the savvy CEO of CIMB, which is generally regarded as Malaysia’s most international-minded banking organisation.
Observers point to Razak’s personal gifts as both a communicator of CIMB’s business direction and his ability to appoint and retain talented staff to help run the bank. Fans also say he has navigated the trends of global finance, most recently reining back his organisation’s once aggressive lending spree.
“Nazir has balanced out the need to be conservative given the global environment with the realisation that you cannot be too risk-averse, so he has made selective efforts to keep expanding the bank,” says a bank analyst at one Malaysian institution.
CIMB’s acquisition of most of RBS’s equities and investment banking capabilities in Asia and Australia in April for £88.4 million (US$ million) had Razak’s investment banking fingerprints all over it, adding needed international banking experience to CIMB, which already dominates Malaysia’s domestic equity market, and enabling it to go after deals offshore.
Meanwhile the bank added a 60% stake in Bank of Commerce in the Philippines for US$288.4 million in May, helping to build its presence in a Southeast Asian market in which it until recently had relatively little presence.
“I’d still point to Nazir Razak of CIMB as the best executive in Malaysia,” adds the head of research at a rival bank. “He’s delivered on a very consistent business strategy to expand in Asia Pacific and recruited the correct people to deliver it.”
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