Jerneh Revisited

Below are the two postings on Jerneh. Caveat emptor.

Tuesday, April 13, 2010

Jerneh

Jerneh shot up on a news article in Star Biz today, which reported that Singapore Business Times wrote that Jerneh Asia was poised to sell its 80% stake in Jerneh Insurance to a foreign player, likely to be HSBC for around RM700m.

Do the math backwards; 80% x RM700m = RM560m. Now you divide by the number of shares in Jerneh Asia which is 180.7m = RM3.09 per share cash. Mind you if the report is correct, Jerneh Asia would still have the listed vehicle.

The History: Jerneh Asia Berhad (Jerneh) was incorporated on 18 October 1995 and listed on the KLSE Main Board on 23 September 1996. The Company was founded as an investment holding company for the purpose of acquiring Jernah Insurance Corporation Sdn Bhd (JIC) as part of a scheme to list the latter on the Bursa. On 30 April 1997, JIC was converted into a public company known as Jerneh Insurance Bhd (JIB).

JIB commenced operations in 1971 as the insurance arm of KUOK Group of Companies and expanded to include clientele outside the Kuok Group. In 1999, the Jerneh group started to expand both locally and regionally as well as diversifying from general insurance. It began with the taking over of Paramount Assurance Berhad; that of Jerneh Insurance (HK) Ltd & Taishan Insurance Brokers in Hong Kong and 40% of Taishan Insurance Brokers Ltd in Hong Kong and Philippines; KRM Reinsurance Brokers Philippines and 40% of Generali Asia NV of the Netherlands.

In FY2000, it acquired the balance 60% of Taishan Philippines and KRM. Generali Asia is a joint venture with Assicurazioni Generali of Italy which has both life and general insurance in Philippines and Thailand. In March 2006 Generali Asia expanded to Indonesia with operations of PT Asuransi Jiwa Asia Mandiri Prima, a life insurance company.

Today the subsidiaries and associates operate in Malaysia, Hong Kong, Philippines and Thailand. The General Insurance division offers a range of products and services. It caters to the insurance needs of small and large-sized businesses and personal lines business. The range of general insurance products and services include property and pecuniary insurance, liability insurance, marine insurance, personal accident insurance, medical insurance, motor insurance, construction and engineering insurance, Foreign Workers' Compensation Scheme and Foreign Workers' Insurance Guarantee.

Kuok Brothers Sdn Bhd (36.98%); BHR Enterprise Sdn Bhd (15.47%) and Sable Investment Corporation (7.12%) are the main shareholders of the company as of 22 December 2009.

Jerneh has done well and looks good.

Sunday, March 28, 2010

Clear For Jerneh

It was a revealing article in The Edge where Jerneh Asia spokeswoman said "We are concentrating on the corporate exercise of the insurance business ... we are still in the midst of talking to the relevant parties on a stake sale.." How to deny but not really deny!



Robert Kuok does not "play up" his counters. Jerneh Asia was below RM1.50 as early as November last year. There were two big ramp up sessions, the first was a couple of months back when it went to RM2.40, and the recent one which we are in the midst of - which went above RM2.80.

There was a corporate announcement in December last year that Bank Negara had no objection in principle for it to commence talks with relevant parties keen to acquire its 80% stake in Jerneh Insurance Bhd. That looked pretty clear to me.

There could two options, a sale or a privatisation. Robert Kuok has been streamlining its business activities in Malaysia disposing the sugar unit to Felda for RM1.29bn. I think Robert is getting out of businesses where he cannot see the ability to be a major player regionally. Looking at where his net worth has been getting the bulk of the incremental wealth from - its, properties and palm oil.

There are plenty of interest now in Jerneh's business, in particular after Prudential scooping AIA. Read the Great Eastern (Overseas Assurance) article in the link below:

http://malaysiafinance.blogspot.com/2010/03/prudential-aia-great-eastern.html

The final question is what price. Its NTA is RM2.41. Looking at similar deals, they have been between 1.5x to 2.5x. Jerneh' insurance business is well managed and should be priced at a premium to recent deal but probably would be closer to 2.0x. This makes for a range of between RM3.61-RM4.82. Caveat emptor people, but it looks good.



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