P&O sees 15% growth in turnover
The SunBiz, 17 February 2001
By Siow Chen Ming
Kuala Lumpur: Pacific & Orient Bhd (P&O) hopes to achieve a group turnover growth of 15% this year due to the expected increase in premium income from its general insurance unit.
In addition, the company hopes to maintain its steady stream of dividend payout (7.5 sen less tax each quarter) which it had practised for the past three years.
"We have put in a lot of effort like setting up call centres and tele-insurance and we hope our premium income would increase by 15% this year," said Chan Thye Seng, P&O's CEO after the company's AGM yesterday.
P&O fully owns motor insurer Pacific & Orient Insurance Co Bhd. The unit contributed close to 95% of P&O's total group revenue of RM151.5 million last year.
However, Chan expects only a marginal increase in group pre-tax profit this year. "There will be a gestation period (for profit to match up) since more efforts will be made to lure premiums."
Despite confident of recording higher premiums this year, Chan said the market is still uncertain given the economic conditions in the US.
"At the end of the day, it is the market that will dictate our performance, not the other way round, so the quality of services becomes very important," said Chan, who does not expect the central bank to approve a rise in motor insurance premiums this year.
It's not necessary; companies (motor insurers) have been making profits," he said.
Chan is confident that P&O's wholly-owned IT unit, P&O Global Technologies Sdn Bhd (POGT) would break even this year. The division develops software applications for the insurance sector and recorded a turnover of RM13.5 million last year.
Due to the uncertain economic conditions, Chan said P&O, as an investment company, holds only about 15% of its total assets in equity and 60% in cash while the rest is in government securities and bonds.
Chan declined to specify P&O's current cash holdings. However, the company's results as at Sept 30, 2000 showed that its cash position stood at RM346.16 million compared to RM299.43 million in the previous corresponding period.
Chan said he is comfortable with P&O holding a large amount of cash and would only look into investing in the local equity market when "foreigners return".
"However, we are interested in the local corporate bonds at present," he added. Despite a 86% drop in net profit to RM9.39 million at the group level, P&O has announced a final dividend of 7.5 sen less 28% tax for the financial year ended Sept 30, 2000. The company paid total dividends of 21.6 sen for last financial year.
On whether P&O will maintain its pattern of dividend payout (7.5 sen less tax each quarter), Chan said: "I don't see why not. But again, you can't tell." At the AGM, shareholders approved P&O's proposal to buy back not more than 10% of its paid-up share capital.
The company did not buy back any of its own shares last year, Chan said, adding that the proposed share buy-back is a precautionary measure.
"In case our shares (price) drop and we see a value in it, we may implement the buy-back to maintain stability."
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