At the close of trading yesterday, MAAH put a damper on investors who may hold out in anticipation of a special dividend following the announcement of the sale- KUALA LUMPUR: Shares of MAA Holdings Bhd (MAAH) slumped nearly 30 per cent after the company agreed to sell its composite unit to Zurich Insurance Co Ltd for RM344 million, effectively leaving it without a core business- MAAH, the most actively traded stock on Bursa Malaysia yesterday, fell 29-61 per cent or 30-5 sen to 72-5 sen, just 10-5 sen short of its lowest closing since November 24 2010- Year-to-date, the stock has fallen by as much as 68 per cent- At the close of trading yesterday, MAAH issued a statement to Bursa Malaysia, putting a damper on investors who may hold out in anticipation of a special dividend following the announcement of the sale- Earlier in the year, rival insurance company Jerneh Asia Bhd which had also sold some of its insurance business, announced a dividend payout plan which could reach as high as RM2-52 a share- MAAH, following that route, was however shut firmly when it said that it has no intention of undertaking a capital repayment exercise- "The board intends to conserve its cash for its existing businesses- Accordingly, the board does not intend to undertake any capital repayment/distribution of the proceeds arising from the proposed disposal to its shareholders," the company told the stock exchange- The board of directors also said that it is their intention to maintain the listing status of MAAH and the focus will be on developing its existing businesses, in particular, the takaful and unit trust fund management business- However, it was not all gloomy for MAAH shareholders as the company also disclosed that it will not fall foul of the Practice Note 16 listing requirements and that it has not triggered the cash criterion to be a cash company- The cash criterion is where the assets of MAAH, on a consolidated basis, consist of 70 per cent or more of cash or short-term investments or a combination of both, following the completion of the proposed disposal- "Based on the audited consolidated financial statements as at 31 December 2010 and on the assumption that the proposed disposal had been effected on that date, the cash and short-term investments of MAAH, on a consolidated basis, only consist about 53 per cent of its assets," MAAH said- "Furthermore, the balance of the purchase consideration, after settling MAAH's borrowings of RM176-3 million, will be received quarterly until two years from completion of the sale," it added- Earlier, investors were spooked when it was disclosed that MAAH will be classified as an affected listed issuer under Practice Note 17 (PN 17) once the disposal is completed- Failure to comply with the obligations under PN17 may result in MAAH's listed securities being suspended from trading and/or being delisted from the official list of Bursa Securities- To recap, MAAH on Monday agreed to sell insurance arm Malaysian Assurance Alliance Bhd (MAA) to Zurich for RM344 million- The deal includes both its life and general insurance arms- The sale also involves its non-core units namely Multioto Services Sdn Bhd, MAAGNET Systems Sdn Bhd, Malaysian Alliance Property Services Sdn Bhd and MAAGNET-SSMS Sdn Bhd- These subsidiaries provide ancillary support services to MAA- MAAH said it will use sale proceeds to repay its borrowings and redeem its medium-term notes (MTNs) amounting, in aggregate, to RM176-3 million- "The repayment of the borrowings would relieve the MAAH group of its financial commitment and obligations to service these debts," it said- It should be noted that the sale would provide the fund required by MAAH to repay its remaining RM140 million MTNs due in January 2012, thereby eliminating the risk of default- MAAH sold its crown jewel in order to meet the minimum supervisory capital adequacy ratio (CAR) of 130 per cent under the Risk Based Capital (RBC) framework- Basically, it must keep more capital for riskier assets and vice versa- To date, MAA has yet to meet the CAR requirement of 130 per cent- "Based on the audited financial statements of MAA for the financial year ended December 31 2010, MAAH needs to inject RM436 million into MAA in order to meet the requirements under the RBC framework as of December 31 2010 and to inject RM667 million into MAA to meet a generally accepted CAR of 180 per cent," it said-...

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