05 June 2014

IJM Land to be Privatised?

  05 June 2014

By THE STAR
PETALING JAYA: Diversified group IJM Corp Bhd is considering privatising its unit, IJM Land Bhd, via a share-swap deal that may include a cash component, according to sources.
Talk of IJM’s privatisation gained momentum this week, with the company’s shares shooting up close to their all-time high, ending yesterday at RM3.27 apiece.
In the past two weeks, IJM Land has gained more than 13% against the benchmark FTSE Bursa Malaysia KL Composite Index, which was down in the same period.
IJM Corp managing director and chief executive officer Datuk Teh Kean Ming declined comment when contacted on the matter.
However, a source close to the company opined: “As a conglomerate, the capital structure of the IJM group is always under review to ensure that its make-up is at an optimal level to meet the overall group strategy.”
Based on IJM Land’s current stock price of RM3.27, IJM Corp would have to fork out slightly more than RM1.65bil for the remaining 507 million shares, or 35% of the company, that it does not already own in order to take it private.
The subject of a potential IJM Land privatisation by its parent company is not entirely new, with rumours going back as far as a few years ago.
JF Apex analyst Jessica Low who tracks IJM Land said that while she believed IJM Corp had the financial strength to privatise IJM Land based on its current cash in hand of RM2bil and a low net gearing of some 0.2 times, she did not see any reason for the parent to privatise it in the near term.
“We do not see any reason, as IJM Corp may consider spinning off its infrastructure segment to unlock its well-diversified businesses.
“Besides, we do not see that the market has significantly undervalued the stock, as its current share price is trading at a mere 21% discount to our revalued net asset value or RNAV per share of RM4.12.”
Low, who has a “buy” call on IJM Land with a target price of RM3.71, said she believed the earnings growth of IJM Land would remain resilient going forward, as its property offerings were mostly landed properties where demand remained strong.
Besides, it also has minimal exposure to Iskandar Malaysia in Johor Baru where there was a current property glut, she opined.
A recent AmResearch report noted that IJM Land was looking to launch around RM3bil worth of new properties in the current financial year ending March 31, 2015 (FY15). This would be anchored by key projects such as The Light Phase II in Penang, Bandar Rimbayu in Shah Alam and Pantai Sentral Park in Kuala Lumpur, the house informed its clients.
IJM Land’s sales for FY14 stood at RM2.05bil against RM1.25bil a year earlier.

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