EcoWorld and GuocoLand join forces for Eco World International’s IPO

KUALA LUMPUR (Oct 27): Eco World Development Group Bhd (EW Bhd) has entered into a strategic partnership with GuocoLand Ltd, a member of Hong Leong Group, for Eco World International Bhd’s (EWI) upcoming initial public offering (IPO) on Bursa Malaysia Securities Bhd.

Under the strategic partnership, GuocoLand will subscribe to a 27% stake in EWI’s proposed listing by the first quarter of 2017. This is equivalent to the stake which will be owned by EW Bhd at the point of listing of EWI.

The aim is to raise more than RM2 billion to fund the development of four EWI projects in total, three in London, UK and one in Sydney, Australia, with an estimated total gross development value (GDV) of £2.4 billion (RM12.2 billion).

“On our own, we will never grow big in London and that’s why we need GuocoLand. Property development is a financial game after all where we need financial strength and GuocoLand is the perfect partner,” said chairman of EW Bhd and executive vice-chairman of EWI Tan Sri Liew Kee Sin at a press conference after the signing of the shareholders’ agreement today.

He added that, going forward, GuocoLand will be a “full-fledged partner instead of just a strategic investor”.

“We have synergies where we combine our expertise and GuocoLand’s financial strength. I believe very much in co-branding and not one-man shows.

“Based on our customer base for the London and Australian projects, only 2% are Singaporean buyers so we hope the partnership with GuocoLand can bring in more Singaporeans.

“GuocoLand also has projects in Shanghai, China so we can also tap into the Chinese market via them,” he added.

GuocoLand group president and chief executive officer Raymond Choong concurred. “It’s about us tapping into each other’s market to have a larger market share,” he said.

“Hopefully this [partnership] will give us an advantage over other developers. We are still very Singapore-centric but the Singapore market is extremely challenging.

“So the aim for us is to diversify our earnings to have at least 50% of it coming in from outside Singapore,” he said, adding that currently 50% to 60% of GuocoLand’s revenue comes from Singapore while China contributes about 30% to 40%.

According to Choong, GuocoLand has been on the lookout for investment opportunities in other markets beyond the four — Singapore, China, Malaysia and Vietnam — that it is currently operating in.

“The UK and Australia markets offer scalability and we believe that with the right products and locations, they offer reasonable returns. Both London and Sydney are dynamic and vibrant global gateway cities with reasonable returns, high level of governance and strong rule of law.

“We believe that the combined strengths of GuocoLand and EW Bhd will provide us with a stronger platform to compete better and more successfully in these two markets,” he said.

Meanwhile, under the Shareholders Agreement, both parties have agreed that EWI will continue to focus on property development beyond Malaysia while EW Bhd will focus on Malaysia.

“This clear delineation of geographical areas of operations will mitigate any potential conflict of interest situations which may arise between EWI and EW Bhd,” said president and CEO of EWI Datuk Teow Leong Seng.

This story first appeared in TheEdgeProperty.com pullout on Oct 28, 2016, which comes with The Edge Financial Daily every Friday. Download TheEdgeProperty.com pullout here for free.