Landmark- An epic battle in the making

Not too long ago, a little-known corporate player wanted to sell off his stake in a commercial bank in order to raise funds for the building of a fanciful hotel in a prestigious location in Kuala Lumpur. He approached the major shareholder of the commercial bank with his proposal but the shareholder did not agree to buy his stake (maybe the price was not right). He then offered to sell his stake to an investment bank. The investment bank in question was not any investment bank but it happened to be the most aggressive investment bank on the land. The investment bank accepted the offer and bought the stake from the corporate player and it went on to do something not-so-friendly... it proposed to takeover the commercial bank. Thus, an epic battle followed. After weeks of jousting, the victory went to the investment bank (whose enlarged franchise put it within a stone’s throw of being the biggest financial institution on the land); the commercial banker went into retirement (with a new problem of what to do with his millions) and the corporate player got the money he needed to build his hotel. History buffs will refer to this fight as the Battle for Southern Bank. When the story ended, it seemed like everyone would live happily thereafter.

Now, the corporate player had a change of heart. Why own one fancy hotel when you can own a chain of fancy hotels? Thus, we have another battle in hand…


The Battle for Landmark

What’s the Prize at stake?

An assets-rich company whose assets include a 20%-stake in a Perlis-based IPP (worth about RM160 mil); a 26.6%-stake in Shangri-la (worth about RM195 mil); two 5-star resorts in Langkawi; a 1000-acre tract of land located in Langkawi; and 60% of the floor area of Sg Wang Plaza.

Who are the Players?

The players are divided into 2 camps- the Incumbent Management and the New Investors.

The Incumbent Management includes Datuk Zakaria Abdul Hamid & Lee Tuck Fook, the shareholders of North Symphony Sdn Bhd, which holds 18.65% of Landmark’s shares. Those reported to be allied to them are one Mark Wee Liang Yee from Sarawak (stake in Landmark unknown) and Tan Sri Mohd Razali Abdul Rahman of the Peremba group (whose company, Dynaura Trading Sdn Bhd is reported to be holding a 8%-stake in Landmark). Collectively, the Incumbent controls 26.7% of Landmark.

The new Investors include the corporate player from our earlier story i.e. Datuk Syed Mohd Yusuf Tun Syed Nasir (holding 5.2% of Landmark’s shares). Those reportedly allied to him include one Ong Beng Seng, a property tycoon from Singapore. The New Investors are reported to have more than 25% of Landmark’s shares.

Major Stakes changing hands

Other than the change of ownership in Zimulia Sdn Bhd (which holds the 18.65%-stake in Landmark) from its previous shareholders i.e. Loo Khee Kwong & Harun Halim Rasip to North Symphony Sdn Bhd; the other notable major block changing hands recently include a block of 4 mil shares acquired by the Incumbent from Landmark’s employees (who had acquired the shares earlier under an ESOS). In addition, Landmark is proposing a private placement of 29.53 mil new shares to parties which are believed to be allied to them and, as such, this is looked upon as a move to tighten their grip on Landmark. Another possible avenue for the issuance of new shares may be a deal involving an investment in a gaming resort in Batam. If this gaming deal materializes and if the payment is by way of issuance of new shares, again the Incumbent’s grip may be tightened.

Based on the latest Bursa filing by Landmark, it appears that the company’s public shareholding spread as at 30 June 2006 is 71.48% comprising 24,602 shareholders holding not less than 100 shares each. Obviously, the parties & their associates will not make it too easy for the public to identify how much shares they owned directly or indirectly but the high public shareholding spread clearly indicates that Landmark is not a hard target for a takeover as no particular shareholder has an insurmountable grip on its shares.

If the Incumbent controls enough shares, they may not have to resort to some of the actions that they have undertaken or proposed to undertake such as the buying of employees’ shares or the proposed issuance of private placement shares. On the other hand, the New Investors have yet to make known their intention nor have they shown their hands in anyway including objecting to some of the Incumbent’s moves, which are highly unusual and detrimental to their interests. All in all, I believe the evidence point to a battle for control that could push the share price of Landmark higher than it is currently.

The movement in the share price of Landmark todate says as much about the possibility of a fight to gain control of its shares (see the Charts below). Nonetheless, I think the latest news of the proposed private placement at 10% discount to the market price will cause a temporary depression in the share price and could provide a good opportunity for investors to gain entry into this stock, if they have not done so already.

From Chart 1 below, I have presented the share price of Landmark together with 4 MAs i.e. 10-day MA without any displacement; 10-day MA with -5% displacement; 10-day MA with -8% displacement; and 10-day MA with -10% displacement. In 2 instances of extremely negative events i.e. the non-approval of the Sg Wang REIT on Feb 6, 2006 and the recent selldown of shares by employees in mid-July, we can see that the shares can drop to the level of 10-day MA with -10% displacement. If the current negative news of the proposed private placement is being discounted in the market, I believe the share price of Landmark may again drop to the level of 10-day MA with -10% displacement, which is currently at RM1.50-1.53. I believe this will be a relatively safe entry into Landmark.

From Chart 2 below, we can see that Landmark has broken above the overhead rising resistance in w/e June 30, 2006. In the event of a sharp correction, this will provide supports to the share at the RM1.35-1.40 level.


















Chart 1: Landmark's daily chart as at August 4


















Chart 2: Landmark's weekly chart as at August 4