(AFP) A plan to restructure United Engineers Malaysia is positive for the country's most indebted conglomerate but has revived concerns about corporate governance, analysts said today.

UEM unveiled yesterday an ambitious plan to trim the group's RM30 billion debt by next year.

It planned to list highway toll operator unit Projek Lebuhraya Utara Selatan (PLUS) by mid-2002, divest assets in six companies and streamline the group into five core business units.

The government earlier this year took over UEM, which in turn owns 31 percent of Malaysia's most indebted group Renong.

The massive debt burden of Renong, once the investment arm for Prime Minister Mahathir Mohamad's ruling United Malays National Organisation, has been a major obstacle to Malaysia's efforts to woo foreign investors back to its stock market.

UEM announced it had also cancelled an obligation by former Renong chairman Halim Saad to buy a 32 percent stake in Renong from UEM and had made a RM2.4 billion provision on the debt.

Analysts said the group's overall restructuring plan was positive as it addressed the huge debt problem and streamlined its corporate direction.

Renewed concerns

But the cancellation of the obligation or put option with Halim renewed concerns over corporate governance, they said.

"Overall I think it's a step in the right direction as they have come up with a new corporate structure and concrete plans as to what they will sell," said an analyst with a local brokerage.

"But there is some question about Halim's put option. They have terminated the whole thing and the investors may view it as a reprieve for Halim."

One institutional dealer said the cancelling of the put option meant that UEM would eventually write off the debt, a move seen as letting Halim off easily.

"This could affect near-term market sentiment," Affin-UOB Research said.

Analysts said the plan to list PLUS by mid-2002, expected to be the largest initial public offer in Malaysia in the last five years, was "quite ambitious" and the company could face some delays.

The success of the planned PLUS listing would depend largely on market conditions at the time, they added.

The group plans to sell stakes in Cement Industries of Malaysia, Ho Hup Construction, Putra, Commerce Asset-Holding, Crest Petroleum and Park May.

Under the revamp, the group would be reorganised into five core businesses - expressway, engineering and construction, environmental services, healthcare and property.