Trading halt fuels talk of restructuring by tycoon

KUALA LUMPUR (Oct 31): Two companies that are substantially owned by tycoon Tan Sri Lim Kang Hoo called for a trading halt yesterday, sparking speculation that the tycoon may be about to restructure his real estate holdings.

The halt pending a material announcement affects Ekovest Bhd and Iskandar Waterfront City Bhd (IWCity). The two local counters have obtained Bursa Malaysia’s approval to suspend trading of their shares until 5pm today.

There is unsubstantiated talk that Lim, who is the common major shareholder of Ekovest, IWCity and Iskandar Waterfront Holdings Sdn Bhd (IWH) — the parent company of IWCity, intends to redesign a proposed merger between IWH and IWCity to now include Ekovest’s land and property-related assets.

According to Ekovest’s annual report 2016, it has a land bank of 22 acres (8.9ha) located in Setapak and Gombak, Selangor. In July, Ekovest announced that it will be given another 30 acres of land within the Kuala Lumpur River City project by the government, for rehabilitating the first 2.2km of a 10km stretch of the Gombak River.

In March, IWH had announced a proposed one-for-one merger offer to take up the remaining 61.7% equity in IWCity, which would see the establishment of one of the largest listed strategic master property developers on Bursa.

The board of IWC has until today to deliberate on the proposed merger offer by IWH, after two extensions.

In tandem with the proposed merger, IWH will embark on a proposed restructuring exercise with Lim, who is director cum executive vice-chairman of IWH, via internal rationalisation of minority stakes within the IWH Group and various Johor state entities including Kumpulan Prasarana Rakyat Johor Sdn Bhd (KPRJ) to consolidate land bank under IWH. This will see an injection of 3,593 acres of land with an open market value of RM4.1 billion into IWH.

Following this corporate exercise, IWH would have a total land bank of over 7,400 acres across Kuala Lumpur and Johor Bahru, with an estimated open market value of RM30 billion.

However, the proposed merger suffered a setback in May after TRX City Sdn Bhd, a wholly-owned subsidiary of the finance ministry, decided to scrap the share sale agreement of a 60% stake in Bandar Malaysia Sdn Bhd to a 60-40 consortium between IWH and China Railway Engineering Corp (M) Sdn Bhd. The Bandar Malaysia project was considered the crown jewel of the IWH-IWC merger exercise.

Nonetheless, IWCity chairman Datuk Ayub Mion had on May 25 given the assurance that the IWH-IWC merger will proceed although valuation could be impacted.

An analyst who declined to be named told The Edge Financial Daily it could be good for the two local property counters.

“A possible restructuring exercise involving Ekovest as well will consolidate significant land bank under IWH and will leave Ekovest as a pure play in the construction and expressway concession businesses,” the analyst said.

“Ekovest’s prime land in the Klang Valley will be a further catalyst for IWCity as the land is ready for immediate development compared with the current soft property market in Johor’s Iskandar waterfront land,” he added.

Speculation of potential consolidation has driven up prices of the two counters since the beginning of this year. Year to date, Ekovest’s share price has risen 20.8% from 96 sen on Jan 2 to close at RM1.16 last Friday, valuing the group at RM2.48 billion.

IWCity’s stock has appreciated by 70.7% during the same period to close at RM1.40 last Friday, bringing a market capitalisation of RM1.17 billion..

At press time, attempts to seek clarifications from both Ekovest and IWCity were unsuccessful.

Lim holds a 63.15% stake in IWH through his 90%-controlled private vehicle, Credence Resources Sdn Bhd, while KPRJ holds the remaining 36.9% stake. IWH owns 38.35% of IWCity. Lim also owns a 32.38% stake in Ekovest.

This article first appeared in The Edge Financial Daily, on Oct 31, 2017.

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