Business

Thursday February 19, 2009

Cash-rich Pintaras eyes acquisitions

By C.S. TAN


SHAH ALAM: Pintaras Jaya Bhd, a leader in the piling industry, sees the current crisis as a time of opportunity for acquisitions.

“It’s not that we’re hoping for bad times, we are also affected by that, but it’s the reality that there may be attractive deals,” managing director Dr Chiu Hong Keong told StarBiz yesterday.

Pintaras is a smallish listed company with a total market value of RM82mil and it sits on an ample pile of cash and listed investments totalling RM78mil.

On paper, investors are according a value of just RM4mil for the business, its management and track record.

The company has been careful with its liquid assets, having made its last acquisition – a manufacturer of tin cans – in 2000.

Having hoarded its cash till now, it could probably acquire assets at half the price that it would have to pay had it made an acquisition a year ago.

Chiu, who has a PhD in engineering, said the type of acquisitions he would make had to be engineering-related such as manufacturing companies.

“Equipment can also be an acquisition,” he said, noting that the cost of cranes, for example, had doubled in the last few years.

Investing in equipment now would lower Pintaras’ costs in readiness for better times in the future.

Its acquisition in 2000 proved profitable.

The net tangible assets of the tin can maker totalled RM12mil when it was acquired and that has increased to RM40mil presently.

“After three-and-a-half years, we got our money back,” said Chiu, who had anticipated a longer payback period of five years.

The can maker has contributed significantly to group earnings, he added.

If the group is unable to find an attractive acquisition, Chiu is agreeable to return surplus cash to shareholders.

If the company deploys cash less efficiently than its shareholders can, it makes sense to make a payout.

“Our net asset value is about RM170mil. If we can’t make a profit of RM17mil, we should return the cash. I look at return to total assets, not return to cash. Shareholders should leave the asset composition to us,” he said.

Cash is useful even in normal times, but in troubled times it is king.

“Our suppliers are confident in dealing with us, we get price discounts and the best deals,” Chiu noted.

Pintaras will employ this scarce resource for an acquisition that it finds attractive.

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