Ekovest plans to pay RM245 mil special dividend

KUALA LUMPUR (Nov 9): Ekovest Bhd intends to distribute RM245 million as special dividend to shareholders, which accounts for 21.7% of the RM1.13 billion proceeds from the disposal of its 40% stake in Konsortium Lebuhraya Utara-Timur (KL) Sdn Bhd (Kesturi) to the Employees Provident Fund (EPF).

“The disposal is in line with the company’s strategy to monetise its matured infrastructure assets, and frees up its financial resources for the expansion of its infrastructure division and other core businesses, such as construction and property development,” its executive chairman Tan Sri Lim Kang Hoo told reporters after the signing of a share sale agreement (SSA) between Ekovest and the EPF yesterday.

Kang Hoo is the largest shareholder of Ekovest, with a deemed interest of 32.4%, which will entitle him to approximately RM79.4 million of the special dividend.

The special dividend still needs board approval, but it works out to approximately 28.6 sen per share. Including the three sen first and final dividend that was announced last month, that brings Ekovest’s total dividend payout to 31.6 sen for the year.

This translates into a dividend yield of 14%, based on the company’s last traded share price of RM2.25 last Friday, before the stock was suspended. Ekovest shares resume trading today.

In total, Ekovest estimated that it will book a balance sheet gain of RM764 million from the disposal. Hence, shareholders can also expect to see a one-off surge in profits in the coming financial quarter. Ekovest is currently valued at 12.3 times historical earnings.

Note that the EPF will only be paying RM921 million of the cash consideration upon completion of the SSA, which is expected to be completed in the first quarter of 2017. The balance RM209 million will only be paid once Ekovest secures the certificate of practical completion for the second phase of the Duta-Ulu Klang Expressway (DUKE).

Recall that Kesturi is the holding company for the first and second phases of Ekovest’s DUKE. The second phase is expected to be completed in the first half of 2017. Of the RM1.13 billion in proceeds from the disposal, RM400 million will be used to repay borrowings, while RM485 million will be allocated for general corporate, working capital and other purposes.

Ekovest is also undertaking the construction of the RM5.05 billion third phase of the DUKE (DUKE 3), now named the Setiawangsa-Pantai Expressway. It spans 32.1km and connects Middle Ring Road 2 with the Kerinchi Link.

“We prefer to view it (disposal of the 40% stake in Kesturi) as a partnership with the EPF. It will be good to have the EPF as a partner when proposing infrastructure projects in the future. It also gives us a chance to explore a similar partnership with DUKE 3 in the future,” said Ekovest managing director Datuk Seri Lim Keng Cheng.

However, he said nothing had been formally agreed upon with the EPF at this juncture.

This article first appeared in The Edge Financial Daily, on Nov 9, 2016. Subscribe to The Edge Financial Daily here.