KUALA LUMPUR: Malaysia Aica Bhd’s (Maica) new controlling shareholder, Datuk Ter Leong Yap, is expected to inject three major property developments into the company with an estimated gross development value (GDV) of RM10 billion.
According to PublicInvest Research, the three major developments are 300 acres in Salak Tinggi, Negeri Sembilan (within Xiamen University), 82 acres in Medini, Johor and 21 acres in Setia Alam, Selangor.
These pieces of land are owned by Ter’s property development company, Sunsuria group. The effective GDV for these developments is RM5.9 billion, which will transform Maica from a wood-based manufacturer to a property player.
PublicInvest said in a research note that the pieces of land are likely to be financed by a combination of equity and debt.
“We believe with proper execution, these pieces of land could provide consistent growth and wealth creation for Maica for the next few years,” it said, adding that the development period ranges from five to eight years.
The three plots of land, said PublicInvest, would generate about RM700 million in net surplus value to the group.
“With that, we estimate the group’s net earnings could potentially hit RM150 million in the next two to three years from an average of less than RM2 million per annum currently.”
The research house said the estimated land costs of RM1 billion appear to be fair and attractive, averaging 10% of the estimated GDV.
The research house has set the ex-all fair value at RM1.30, based on 40% discount to its revalued net asset value (RNAV) estimates, providing a 46% upside to the ex-all last price of 90 sen.
In Jan 24 this year, Maica received an unconditional takeover offer from Klang-based Ter and his family members to acquire all its shares at 85 sen per offer share. The offer price was at a discount to Maica’s market price of 96 sen that day.
Tycoon Tan Sri Robert Tan Hua Choon sold his entire 14.3% stake and ceased to be a substantial shareholder following the takeover offer.
Ter, who is also the deputy president of the Associated Chinese Chamber of Commerce and Industries of Malaysia (ACCCIM), currently owns a 50.12% stake in Maica. His direct stake is 21.3% or 33.72 million shares, while his indirect stake (via TER Equity) is 28.81% or 45.62 million shares.
PublicInvest said that the stock price has since risen by 56% from 96 sen, in anticipation of the asset injection. The counter has rallied 94.25% to RM1.69 on Feb 17 from 87 sen on Jan 2. The stock closed at RM1.45 yesterday.
The research house pointed out that Ter has made a total of RM47 million investments in the firm. “Assuming 3-for-1 rights issuance needed to fund the land injection, a further RM167 million is required to maintain the stake.”
“We estimate that by raising equity through 3-for-1 rights issuance and the remainder by debt, the group’s net gearing will still be manageable at 0.6 times,” it said.
The research house estimated Ter’s gain from land sale to be RM218 million, roughly equivalent to his total investments in Maica.
This article first appeared in The Edge Financial Daily, on March 25, 2014.
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