Analysts uncertain over Barito-CASH transaction

Analysts uncertain over Barito-CASH transaction

SINGAPORE (Reuter): Analysts are uncertain about what lies
behind this week's developments in the reverse takeover of
Malaysia's Construction and Supplies House Ltd (CASH) by
Indonesian timber tycoon Prajogo Pangestu.

CASH, listed on the Kuala Lumpur Stock Exchange (KLSE) and
Singapore's over-the-counter market, in February announced an
alliance with Prajogo's Barito Pacific (Barito) group. The
alliance will be signed on Saturday.

Malaysia's Business Times this week said CASH is also buying a
stake, believed to be about 30 percent, in Barito Pacific.

A 30 percent stake would swell to 2.56 billion ringgit from
700 million ringgit the value of assets to be injected into CASH
in return for shares, a possible loan and cash.

While analysts say the deal is positive for CASH in that it
transforms a "mere $2 (ringgit) company" into an asset-rich
concern, they are uncertain of the Indonesian group's motives and
the long-term implications for CASH.

Yap Huey Chiang, timber industry analyst at Baring Securities
in Kuala Lumpur, said CASH would be better off buying timber
processing companies or companies with timber concessions outside
Indonesia.

Yap said buying into Barito Pacific, whose main asset is its
2.89 million hectares of timber concessions in Indonesia, makes
little sense as CASH would not be able to sell the logs outside
Indonesia.

Another sector analyst, from a Singapore brokerage, said
Barito was probably attracted by the fact that Malaysian stocks
tended to command higher price-earnings ratios than Indonesia's.

"By injecting their assets into a Malaysian listed company,
they (the Indonesian group) would get better market value," the
analyst said.

Analysts also wonder why there has been such a high level of
support from both Malaysian and Indonesian governments for the
deal. One reading is that Malaysia and Indonesia want to
stabilize timber prices by controlling the supply.

Despite their uncertainty, both analysts and dealers said
CASH's stock is likely to surge when trading resumes on June 20.

The stock was suspended in March at S$4.68 in Singapore and
$7.95 ringgit on the KLSE. "Hopefully after the signing, things
will be clearer. But I think only one to two years down the road
can we be sure whether to recommend CASH as a long-term buy for
institutions," said the Singapore brokerage analyst.