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Ben Kwok

Traders say speculation of a generous special dividend is also a key driver

Speculation over a special dividend, a potential privatisation and possible takeover sent cash-rich Guoco Group's share price surging 13.5 per cent this week.

Shares in the investment company controlled by Malaysian billionaire Quek Leng Chan yesterday rose $3.70, or 7.5 per cent, to close at a 29-month high of $53, with 1.76 million shares changing hands.

The trading volume was more than nine times the daily average over the past month.

In a note to investors yesterday, CLSA said keen buying interest had pushed the shares to their highest close since a share buyback in December 2001.

'This is unusual as there has been no fresh news on the stock, which is well known to be sitting on heaps of cash after the disposal of Dao Heng Bank to DBS,' it said.

Traders and fund managers said there were several rumours in the market that had driven Guoco's surge.

Speculation of a 'generous' special dividend was the key driver, they said.

Steven Leung Wai-yuen, a director with UOB-Kay Hian Hong Kong, said: 'There has been talk that a Quek company in Singapore needs cash to acquire an asset. Since Guoco is sitting on a big pile of cash, it can help Quek finance the acquisition by issuing a special dividend.'

Mr Quek, through Guoline Overseas, has a 41.88 per cent stake in Guoco.

Analysts said Guoco had a net asset value of more than $80 per share, of which more than 82 per cent, or $66, was cash.

DBS Bank paid Guoco Group $42.9 billion to acquire a controlling stake in Dao Heng Bank in April, 2001.

After completing the sale of its remaining 20 per cent stake in Dao Heng Bank in January, Guoco Group cashed in an additional $10.78 billion.

The group's assets include a 23 per cent holding in Malaysian-listed Hong Leong Credit, and a stake in Dao Heng Wealth Management, which followed a  DBS decision  not to exercise a purchase option early this year.

The company has little debt.

Mr Leung said a special dividend would usually be declared along with a company's results announcement.

'Guoco Group's next results announcement won't come until sometime in October,' Mr Leung said.

ICEA Securities Asia said a possible privatisation play was the theme for Guoco's recent share price rise.

Based on yesterday's closing price, Guoco shares were trading at a 34 per cent discount to its net asset value.

However, Mr Leung said it would be extremely  costly for Mr Quek to privatise Guoco Group, as he had only a 41.88 per cent stake in the company.

The Kuwait government's investment arm owns a 21.75 per cent stake in Guoco, with the remaining shares in public hands.

There has also been speculation that Li Ka-shing might be interested in taking over the cash-rich company, which most marketwatchers believe is highly unlikely.

In March, Guoco Group reported an annualised 19.3 per cent decline in attributable profit to $440.51 million for the six months to December 31 last year.

Guoco Group said turnover shrank 20.5 per cent to $887.58 million due to the smaller contribution of treasury services, property investment, securities and commodities broking and insurance business.

However, earnings per share rose 2.3 per cent to $1.36 as a result of a buy-back in November last year.

Big players flag interest - B5



Guoco soars on bid rumours