Pantai plans concession sale

Pantai Holdings Bhd, a healthcare group, plans to sell its Malaysian government concession businesses as it seeks to focus on growing its hospital business, sources say.

The group, owned by Khazanah Nasional Bhd and Singapore's Parkway Group, holds a long-term contract to provide services like laundry to public hospitals in three states and another for foreign worker health checks.

It is believed that Pantai has already approached potential suitors like government-linked companies or government-linked investment funds for the sale. When contacted by Business Times, an official from Pantai declined to comment.

"It's hospitals that they can add value to, there's not much value to add for concessions," said one source.

Both Pantai Medivest Sdn Bhd, the support services firm, and Fomema Sdn Bhd, the foreign worker health check company, are profitable oligopoly and monopoly businesses respectively.
Pantai Medivest provides services to hospitals in the southern peninsula. Faber Group Bhd does the same work in northern peninsula and Sabah and Sarawak, while Radicare operates in central and eastern peninsula areas.

Pantai holds Fomema through wholly-owned Pantai Fomema & Systems Sdn Bhd.

Pantai Fomema holds 75 per cent of Fomema that has a 15-year concession ending in 2012. Fomema's role is to implement, manage and supervise nationwide mandatory health screening programme for all legal foreign workers in Malaysia.

There are some 1.2 million legal foreign workers in Malaysia.

Sources said the concession is not something that Pantai can grow although it provides a steady stream of income.

Furthermore, a sale would help it deal with an issue that is a political hot potato.

In late 2005, politicians and lawmakers were up in arms questioning why Parkway, a foreign firm, could end up holding major stakes in two government concessions.

This led to Khazanah taking control of Pantai in 2006, and it has been running the group in partnership with Parkway since.

A search with Companies Commission of Malaysia reveals that in the financial year ended December 31 2008, Pantai Fomema made a profit after tax of RM41.58 million on the back of RM235.87 million revenue.

The company also has current fair and equitable separation assets of RM71.7 million and is free of debt, with reserves of RM58.87 million.

Pantai Medivest made RM207.8 million revenue for 2008 and a profit after tax of RM14.8 million, documents from the commission showed.

Pantai Medivest's 15-year concession ends in 2011.

However, the sale of these concessions, which would need government approval, might be tricky as there is probably a limited number of buyers.

The fact that the contract ends in less than three years also complicates matters because a buyer might not want to pay too much due to uncertainty over the concession's renewal.

However, Pantai would probably want a price that reflects the concession being renewed.

Pantai is now wholly-owned by Pantai Irama Ventures Sdn Bhd, which in turn is 60 per cent held by Khazanah Nasional Bhd and 40 per cent by Singapore's Parkway Holdings Ltd. Khazanah also has a 24 per cent stake in Parkway.