Genting's entry sparks interest in PUC's digital banking bid

© Provided by The Edge

LAST Tuesday, ACE Market-listed PUC Bhd announced that GPVF Sdn Bhd, an indirect subsidiary of Genting Plantations Bhd — the plantation arm of the Genting Group — will be taking up a 10% stake in PUC.

The announcement was received positively by the market, with PUC shares gaining as much as 27% to touch 21 sen last Wednesday, a day after the announcement was made.

The entry of Genting group into PUC is seen by market watchers as part of the plan by the former to get a piece of the action in the Malaysian digital banking space, as PUC is leading a consortium that submitted a bid for a digital banking licence in June.

On PUC’s end, the heavy minimum capital funds requirement stipulated by Bank Negara Malaysia for a digital banking licence of RM100 million unimpaired by losses that is required for the first three to five years of operations of the digital bank would mean that PUC would need to leverage the financial strengths of its strategic partners in the consortium. Its balance sheet as at June 30, 2021, shows a cash balance of RM2.79 million, and total borrowings of RM3.77 million.

Interestingly, PUC’s July announcement on its bid states that its strategic partners in the consortium are the Sabah government, the Pahang government and a conglomerate, which it does not name. While it is understood that both state governments will each have a 20% stake in the consortium, it is believed that Genting Digital Sdn Bhd, a wholly-owned subsidiary of Genting Bhd, is likely to take up a direct stake in the digital bank consortium.

Under the Financial Services Act 2013, restrictions on shareholding for a digital bank only applies to individuals, with the cap maintained at 10%, while there is no restriction for corporates and other non-individuals.

When asked if the Genting group is the conglomerate that will be taking a stake in the consortium, PUC CEO Cheong Chia Chou, in an emailed response to The Edge, says the group is “unable to confirm the identity of the large conglomerate at this stage”.

Meanwhile, a representative from Genting Plantations had a “no comments” reply to questions sent by The Edge on its subscription for PUC shares.

While the identity of the conglomerate in the consortium remains unknown, PUC’s announcement on GPVF’s entry into the company last Tuesday is seen by market watchers as a part of the plan by the Genting group to gain exposure to the Malaysian digital banking space.

In its filing, PUC says that it has entered into conditional subscription agreements with three companies in relation to its proposed private placement of 375.06 million new shares at 12.5 sen per share, to raise RM46.88 million.

The three companies that are buying the new shares are GPVF, Matrix Edge Venture Sdn Bhd (MEV) and KH Lim Capital Sdn Bhd (KHLC). The agreement will see GPVF subscribing for 162.53 million shares, or a 10% stake for RM20.31 million.

Given the value of the investment, Genting Plantations did not make any announcement on this. Genting Plantations’ market capitalisation stood at RM6.48 billion last Friday.

Meanwhile, MEV, a company whose shareholders comprise Chai Hann Lin (40%), Sabah-based Borneo Armor Sdn Bhd (20%) and Datuk Seri Adnan Wan Mamat (40%), who is also a director of a subsidiary of the Royale Pahang Durian Group, will subscribe for 125.02 million PUC shares or a 7.69% stake, and KHLC, whose shareholders are Datuk Anthony Lim Kim Hai of the KH Lim Group (80%) and Yap Choon Fong (20%), is subscribing for 87.51 million shares or 5.38% in PUC post-issuance.

PUC intends to utilise RM15 million of the proceeds raised from the issuance for acquisition or investments in suitable and complementary businesses, which includes its digital banking bid, as well as the establishment of an online food delivery platform and its digital money lending business. The remainder of the proceeds will be used for the upgrading and marketing of its Presto digital platform.

According to Bank Negara, there are 29 applications for the digital banking licence, ranging from banks, industry conglomerates, technology firms, e-commerce operators, financial technology (fintech) players, cooperatives and state governments.

On what makes the PUC-led consortium stand out in its bid compared with the rest, Cheong says that PUC’s existing digital ecosystem, Presto, will enable the consortium to be a solid contender with its existing fintech, marketplace and service solutions.

“Our digital ecosystem, which encompasses e-commerce, logistics, e-wallet, loyalty programmes, and financing and payment solutions, will form a natural complement to the digital banking licence bid and enable it to drive innovation and boost digital transformation through its service offerings.

“If we are successful in our bid, we do not envisage digital banking becoming our core business but rather complementing our other businesses in Presto,” he says.

PUC closed at 16 sen last Friday, valuing the company at RM200 million.

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