Doubts have been raised over Khazanah Nasional Bhd’s acquisition of a 10 percent stake in Hebei-based Oriental University City Ltd (OUCL), valued at RM150 million.

NONE One of the major concerns is that Khazanah - the government’s investment arm - had made an overpriced investment, said DAP publicity chief Tony Pua.

According to Pua, who is also a key DAP economist, OUCL is valued at RMB3 billion with a net profit of RMB52 million in 2009.

“This means that Khazanah paid an astronomical historical price-earning (PE) ratio of 58 times,” said Pua in a statement today.

Coupled with the fact that the acquisition is more than eight times OUCL’s net book value and it is only expected to be listed on the stock exchange in 2013, Pua surmised that the investment was “clearly a high-risk transaction”.

“As a comparison, at today's prices for substantially lower risk, but equally exciting global growth prospects, Khazanah could have purchased Apple Inc for a PE of 24, Google Inc for a PE of 26 or even Amazon.com Inc at the same PE of 58.

“Why did Khazanah pick an investment in Hebei which is expensive, high-risk and illiquid?” asked Pua.

No synergy

Additionally, Pua questioned how OUCL would complement Khazanah’s existing portfolio since it does not include any education services providers, both locally and abroad.

“This rules out any synergies between its invested companies,” he said.

Pua believes that Khazanah should rightfully be focusing on the controversial Iskandar Malaysia project, which will cost billions of ringgit, to ensure reasonable returns.

“Instead, its out-of-the-blue investment in an education services provider all the way in Hebei, China drains the confidence of Malaysians in Khazanah's ability to professionally manage the wealth of the nation,” he said.

Khazanah’s 10-percent stake was acquired from Singapore-based Raffles Education Corporation Ltd, which fully owns OUCL.