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AWise: Prime Ministerial Protégé - Syed Mokhtar Albukhary
By Andrew Ho

1/1/2002 11:19 am Tue mainaction=50&articleid=2358

Prime Ministerial Protégé

By Andrew Ho, AsiaWise 17 Dec 2001

Ever since 9-11, Prime Minister Mahathir Mohamad has been looking just peachy. His hard line stand against Muslim fundamentalists and fanatics and the application of the Internal Security Act (ISA) has finally found some appreciation in the U.S. In the wake of the terrorist attacks, support for him at home has also grown.

This has been at the expense of the Barisan Alternative (BA) -- comprising PAS, an Islamic fundamentalist party; Keadilan, a party formed to fight for the disposed ex-Deputy Prime Minister Anwar Ibrahim; and DAP, a Chinese dominated opposition party. Now the once strong BA finds itself cleaved by infighting -- and further weakened by retreating grass-root supporters disquieted over worries that the BA, were it to come to power, might rule the country as an Islamic state.

This sticky point caused the DAP to withdraw from the BA coalition a few months back. Keadilan, too, is feeling the stress -- several founding members departed in a huff over disagreement on party objectives and focus. Even PAS is feeling some backlash over its more controversial policies.

All this has played into the hands of Mahathir, the master politician. And while it is his luck that the opposition should be disassembling before his eyes, this premier of 20 years hasn't lasted this long without street smarts.

Since the departure of Tun Daim, his finance minister and one-time friend, Malaysia has slowly returned to fund managers' radar screens. The economic reforms and the accompanying 'clean up' campaign gained enough momentum for foreign investors to finally notice -- and it wasn't all that long before JP Morgan, Merrill Lynch and other foreign houses started calling Malaysia an investment safe haven. See "Malaysia, Contrarian's Play," Oct. 3, 01.

With all this good stuff visibly happening, one name keeps coming up. Little is known of Syed Mokhtar Albukhary, a businessman who hails from the northern state of Kedah -- Mahathir's home state and political base, as it happens.

Syed made his money in the '90s running businesses in Johor across the causeway from Singapore, during the tenure of former Johor state premier, or Mentri Besar, Tan Sri Muhiyiddin Yassin.

He is believed to be instrumental in the listing of Johor Port and the completion of the first phase of the high-tech Port of Tanjung Pelepas (PTP) -- now ranked the fastest growing port in the world. The company managed to convince Maersk Sealand to make PTP its hub -- diverting 2 million TEUs per annum container volume from Singapore in the process. Maersk, in fact, liked PTP so much it bought 30% of the company. Now Evergreen is expected to join the bandwagon, hinting loudly that it will shift its container operations to PTP next year to take advantage of PTP's lower costs and high-tech facilities.

Associates familiar with Syed Mokhtar say the port project was the turning point in his career. He holds a 50.1% controlling stake in PTP via Seaport Terminal (Johor). Other things enhanced his reputation, not least his Albhukary Foundation, which completed the RM70 million Islamic Arts Museum in Kuala Lumpur at the height of Asian Crisis in 1998.

Syed shot to prominence when he took a 19.9% stake in MMC (Malaysia Mining Corp.) in the middle of last year. MMC was to be transformed from a stodgy mining company into an infrastructure play with the injection of a 50.1% stake in PTP and the acquisition of a 22.7% stake in listed independent power producer Malakoff. But the deal was scuttled at the 11th hour when the parties couldn't agree on the cash-share split.

Call it coincidence, but with the departure of Daim, the PTP-MMC deal has been revived, with a higher component of cash on the table. Under MMC's latest proposal, it will buy a 50.1% stake in PTP for RM1.9 billion -- to be satisfied with RM1.048 billion in cash and the issue of 285.3 million new MMC shares priced at RM3.00 each. The original terms were 50.1% for RM1.9 billion worked out at RM884 million in cash and the issue of 338.7 million new MMC shares at RM3.00 each.

Syed Mokhtar is also touted as the man behind the revival of the national electrical and electronics project -- Malaysia Electric Corp. Bhd. (MEC). With the mega-cleanup going on in the once high-flying Malaysian conglomerate UEM/Renong, Syed Mokhtar is once again singled out at the man behind the revitalization of UEM's construction arm. Market sources expect UEM to inject its construction business, with an outstanding order book of RM 3 billion, into listed subsidiary Intria, which is also involved in the construction business (and owns the Penang toll bridge concession).

The injection of the construction business will monetize UEM's construction unit and provide an avenue for the government to reduce UEM's debt burden by placing out Intria's shares to institutional investors. Syed, again, is the hero of the hour, credited with unlocking value heretofore trussed up in Intria and UEM's construction business.

But doesn't all this sound just a little familiar? Didn't unknowns like Halim Saad (one-time big Renong/UEM Group shareholder) and Tajuddin Ramli (the man who ran Malaysia Airlines into the ground) travel a similar route? Both were protégés of Daim and darlings of the stock market in the mid 90s.

People in the banking sector have been quick to point out differences. Syed Mokhtar has money to invest in new projects and actually puts some into the investments he holds -- definitely not the case with these '90s hucksters who preferred 100% financing and quick turnarounds.

Syed, Halim and Tajuddin all started out around the same time, with Halim and Tajuddin thrust into the limelight, as the next generation of Bumiputra businessmen to lead corporate Malaysia, while Syed stayed low key. Ten years on, Halim and Tajuddin have seen their reputations shredded, their companies either rescued or snatched away by the government. Syed in the meantime has been quietly proving himself an astute businessman, best exemplified by his role in building the world's fastest growing port.

With the failings of Daim's protégés still fresh on investors' minds, Syed Mokhtar has set himself apart. As Malaysia's 'clean up' campaign still roars along, and with business skills that clearly outdistance protégés of yesteryear, Syed is poised for big things in Malaysia's corporate world -- and investors would be well advised to pivot their radar scanners accordingly.