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Thursday, April 11, 2013

OSK aims to double profit and focus on financing and property development


PETALING JAYA: OSK Holdings Bhd expects to double the profit from its other businesses after divesting its investment banking arm to RHB Capital Bhd for RM1.95bil last November.
OSK group founder Tan Sri Ong Leong Huat said the group would concentrate its efforts on its financing business under OSK Capital, and also its property business under OSK Property Holdings Bhd.
He said excluding the investment bank's contribution, its existing businesses made about RM15mil in net profit, adding that their performance would be better this year, as the group made substantial amount of impairments to its balance sheet last year.
“We will also develop the land next to Plaza OSK and make it as a recurring income for the group.
“This commercial and retail project will have a development cost of RM300mil to RM400mil with the gross development value around RM1bil with a net lettable area of one million square feet,” he said after the group's annual general meeting yesterday.
He said the group's current plans would keep the group busy for another one to two years.
He said despite hiving off its investment banking unit, the group would still continue and maintain its dividends payment with profits derived from its 10% equity interest in RHB.
“RHB pays about 35% of its net profit as dividends, and based on that we will be able to get certain amount of money to pay our shareholders.
“The most important thing is we will be able to sustain and continue paying dividends rather than just a one-off payment.
“This has been our group policy, and we have been able to sustain our dividend payment since our listing, and this tradition has to be continued,” he said.
Last year, RHB made RM1.78bil in net profit. Its revenue was RM8.02bil.
Ong said there would be enough money to pay dividends, as OSK Holdings has RM1.5bil in reserves that could be used when needed.
“We will continue to pay dividends in good times and bad times. Last time when we had the investment bank, we needed to preserve a lot of capital for growth.
“Now, as we have hived that off, I think we will be able to provide more for dividends,” he said.
He also said the company does not have any M&A targets in mind yet, as it was still trying to tap its existing businesses and expand them like its financing business/
“Our investment in RHB is a very strategic investment, and as the RHB financial group is the fourth largest banking group in Malaysia, there is a lot of room for growth,” he said.
He also expressed his interest in the real estate investment trust (REIT) business as well, with the development of the commercial property next to the current OSK Plaza.
“We own the land, and this project would take us about three years. Eventually, when the time comes, we will look at the REIT structure, once the project is completed.
“We will have a sizable recurring income asset once it is completed, and we can bundle it with the property business to make it even more sizable,” he said.
Ong said OSK also owns some other recurring assets like commercial properties in Penang and Ipoh.
“We have just completed our M&A with RHB, and it is still too early to jump on the bandwagon and do other things. We will let the whole team settle down, evaluate, and see whether there is any more capital injection needed. Otherwise, we will leverage on this and try to grow our exisiting businesses. We do not want to embark on too many things in one go,” he said.

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