JCorp’s ‘Membina Dan Membela’ Mandate Shapes Growth Strategy
By Nurunnasihah Ahmad Rashid
KUALA LUMPUR, Nov 13 (Bernama) -- Johor Corporation (JCorp) views growth as more than a corporate ambition, with every commercial opportunity carefully evaluated against its founding purpose of “Membina dan Membela” (Creating Value, Enabling Sustainable Communities).
Its chief investment officer Shamsul Anuar Majid told Bernama that the key consideration was whether an opportunity would strengthen the organisation as a whole and create more sustainable value for stakeholders, balancing opportunity with responsibility.
He said growth is integral to JCorp’s purpose of “Membina dan Membela”, as expanding its business is necessary to sustain its broader agenda of creating value for stakeholders.
There are essentially two options to meet its growth objectives, namely, growing its portfolio of businesses organically or acquiring companies with latent potential, he said.
As such, JCorp will continue to explore acquisition opportunities to drive growth, guided by a disciplined investment approach that balances potential returns against risks and safeguards stakeholders’ interests.
Shamsul Anuar said acquisition decisions require careful assessment of potential returns and the risks involved, particularly given JCorp’s responsibility as a state-linked corporation.
He said one way to reduce risk is to consider businesses adjacent or complementary to JCorp’s existing operations.
“Familiarity helps us reduce the risk of unknown factors in target companies, like latching a new piece onto our existing jigsaw puzzle to create a bigger, better whole.
“Familiarity also allows us to build a better cash flow projection that helps us convince our board to approve the acquisition,” he said.
However, he said opportunities sometimes avail themselves in totally new businesses, with potentially high returns often found in new technology, artificial intelligence (AI), scientific discoveries or patents.
“The question is, how do we approach these opportunities from a methodical point of view?
“As a state-linked company, we cannot adopt a ‘gut-feel’ approach like entrepreneurial companies with higher risk appetite,” he added.
Shamsul Anuar said the first question, before undertaking detailed analytical work, is whether the target company fits JCorp’s overarching business strategy.
“If the target company is deemed to fit, it ‘ticks’ the first criteria, while the second question is, what are we buying? In my experience as an investment analyst, most companies seldom answer this question properly.
“Numerous ‘feel good’ factors are lumped together to justify the acquisition, without nailing exactly what makes the target company attractive,” he said.
He said JCorp stress-tested its reasoning by evaluating whether the target assets fitted the group’s purpose.
“We ask ourselves, are we buying the company because of its new, promising products? What is the company’s market share and growth record? Can its portfolio of promising research and development be commercialised?
“Does it have patented technology or trade secrets that are unique in the market? Does it have a talent pool with specialised skills or business network? Can its current and potential contracts scale up our existing business?” he said.
Shamsul Anuar said there must be a clear rationale for how ownership of the business will strengthen what JCorp is building for the future.
He said JCorp would only attach a monetary value or price tag to the target company after it has full clarity on the acquisition rationale, although valuation is inherently an abstract exercise.
Various valuation methods are available, including discounted cash flow, enterprise value to earnings before interest, taxes, depreciation and amortisation, price-to-earnings multiples and net tangible assets, and the exercise requires careful judgement, he said.
Shamsul Anuar said once both parties have broadly agreed on a transaction value, legal and financial due diligence would be undertaken to examine the target company’s governing documents, assets and financial accounts.
“As a company that is owned by the state, acquisition activities are something that we do not take lightly.
“We have a fiduciary duty to ensure the interests of the state are protected as we seek to acquire new companies into our portfolio,” he said.
He said it is an important part of growing the business, and the company has adopted a careful and methodical approach in doing so.
“Continuously looking for acquisition opportunities is part of Membina, but being methodical about the acquisition process is part of Membela, meaning protecting the interest of our stakeholders, at all times,” he said.
-- BERNAMA