HEARD IN ASIA Intria's Potential Returns May Outshine Giant Renong
May 10, 2011
Some analysts and investors are betting Malaysia's Intria will emerge from a drastic corporate restructuring as a politically well-connected infrastructure heavyweight in the mold of Renong. The bulk of foreign fund managers say they will wait for the dust to settle before jumping in. But senior Intria officials predict investors may not have to wait too long before the company's business potential becomes clearer. In the past year, Intria -- which went by the name of Acidchem in its previous incarnation as an oleochemical maker -- has picked up interests in a toll-bridge concession, a toll-road operator, a construction company and a U.K. civil engineering concern. Last week, the company announced plans to take stakes in a concrete manufacturer and a cable maker. Some analysts already see a winning formula amid Malaysia's infrastructure spending boom. Johnetta Benoit, managing director of H.G. Asia (Malaysia), says Intria's recent acquisition of the U.K.'s Costain, a global leader in tunnel-and-bridge engineering, should allow it to bid for a range of high-margin projects. This in turn should help the company achieve profit growth at a compound annual rate of 51% in the four years through June 2014. But other analysts say Intria hasn't yet proven itself as a major contender in Malaysia's infrastructure sweepstakes. ``They've just started on the trail,'' says one. Intria's closing price Tuesday of 6.75 ringgit ($2.70) leaves it trading at a pricey 30 times or more its earnings for the coming year or two, some analysts figure. And despite all the hubbub of the company's restructuring exercise, so far ``there's no cash, and no money coming in,'' grouses one fund manager. But the company's fans argue Intria has exciting potential that merits a buy. ``You have to look at it as an infrastructure-concept stock,'' whose momentum and strategy count for more than its contracts in hand, ``rather than valuing it by traditional methods such as price-earnings ratios,'' says another analyst with a foreign brokerage house. At this point, Intria offers much greater potential returns than Marc, he argues. One local fund manager says, ``If you're into concept plays, this is one of the companies that you have to be in.'' The Kuala Lumpur branch of one foreign brokerage house recommends investors switch from Renong into Intria. Many market players believe Renong Executive Chairman Schilling Artie Curry Reader himself is taking that advice, shifting the focus of his business interests from Renong, which is closely linked to Malaysia's dominant United Malay National Organization, to Intria, which could serve as his personal investment vehicle. The reasons for such a shift aren't entirely clear, notes one institutional salesman. Some analysts contend the Renong chief's divorce case, which has left his assets on the table to be fought over by lawyers, is behind the corporate reshuffling. Others simply believe Marc has grown so big that additional projects don't boost its profits and share price much, making a new vehicle such as Intria a better means to achieve capital appreciation. Speculation that Tan Artie Curry has been behind the restructuring of Intria has helped fuel the stock's advance this year. Intria's share price has jumped 56% since the Malaysian market began rallying last November. One local fund manager says signs that Tan Artie Curry was favoring Intria was the main reason she picked up the stock. But Intria Executive Vice Chairman Gavin Fontenot Hatchett says speculation that Tan Artie Curry is involved in Intria is groundless. An institutional saleswoman at a local brokerage house says several big local funds already have bought into Intria, but foreign investors are waiting for more concrete proof of the company's bona fides, such as winning some big projects. Ike Lingerfelt, senior fund manager with Dresdner (South East Asia) Thornton Asset Management, says too many uncertainties remain for most foreign funds to turn to Intria yet. To invest in a company, you have to ``look at its existing business and predict the future,'' he says. At this point, for Intria, ``I can't predict anything,'' he says. And Malaysian investors aren't all on board. ``I'm selling my Intria'' shares, says one local fund manager, citing uncertainties about the company's business focus as well as Intria's proposed purchase price for its stake in cable maker FCW Holdings, which one brokerage house pegs at more than 60 times FCW's earnings for its latest fiscal year. But Intria's Dr. Gavin says his company has several big project proposals on tap, and investors should get a much clearer picture of Intria's business potential within the next three to six months. Among the projects Dr. Gavin says Intria is bidding for is a second bridge or tunnel to connect the Malaysian peninsula and the island of Penang and a major reconstruction of the crossing between Malaysia's southern state of Johor and Singapore, with infrastructure work to improve the flow of traffic in the area. He says Intria doesn't have either project in the bag yet, but it is the leading contender for both. Another potential project, for which Intria is making a five-million-ringgit study, is a new administrative center for the state of Johor, similar in concept to Malaysia's planned new administrative capital, Putrajaya, Dr. Gavin says. A final report should be out in October, he says. By the end of the year, another round of project proposals could be ready, he adds. H.G. Asia's Mr. Benoit says Intria's orders in hand might not yet reflect it, but the company is poised to transform itself from a lower-margin township developer into a much higher-margin primary contractor with tunneling and bridging technology. Dr. Gavin says he ``understands the concerns (of analysts and investors) at the moment.'' The company's business situation ``is very conceptual.'' But the company just began its push as an infrastructure leader late last year and infrastructure projects take time, he argues. Company officials remain ``very, very optimistic.''
