Thursday 28 Mar 2024
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This article first appeared in The Edge Financial Daily on March 7, 2018

KUALA LUMPUR: NWP Holdings Bhd’s stock climbed as much as 76.9% yesterday after the company said it would jointly undertake redevelopment of the Zhuhai International Circuit (ZIC) in China with property developer LBS Bina Group Bhd.

The stock hit an intraday high of 23 sen before paring some gains to close at a seven-month high of 18.5 sen, up 5.5 sen or 42.31% from Monday’s close of 13 sen. It saw 98.68 million shares change hands, making it the second top active stock on Bursa Malaysia.

However, NWP’s share price has fallen by 10% over the past year.

LBS told The Edge Financial Daily that it could have chosen any other listed company, but settled on NWP due to the timber group’s strong financials.

“It could have been any other listed company which may have fitted into our planning. NWP was picked as it is a small company and has zero bank borrowings, and thus fits into LBS’ plan to raise funds for the project,” it said in an email response.

“With this, we will not burden LBS shareholders for the funding while still maintaining control of ZIC,” LBS said.

Asked when the works for the project will commence, LBS said it will need time to complete the exercise and properly plan the development to maximise returns.

LBS on Monday signed a heads of agreement with NWP to jointly develop the ZIC project, which will see the former subscribe to 1.1 billion NWP shares, representing a 73.7% stake, for RM93.5 million or 8.5 sen per share to partly fund the development. The ZIC is a joint venture between LBS (60%) and China’s state-owned Zhuhai Jiuzhou Holdings Group Co Ltd (40%).

Public Investment Bank research head Ching Weng Jin said the announcement was a significant step towards unlocking the value of ZIC, deeming the move a smart one by LBS in shifting the funding requirements to NWP while still maintaining economic interests over the project.

Ching said the redevelopment of ZIC would have been a strain on LBS’ financial resources considering the huge estimated total investment of US$526 million (RM2.1 billion), with the group possibly having to fork out about US$315.6 million for its 60% stake.

“With NWP roped in, direct financial responsibilities will now be passed on to another entity without burdening the existing shareholders of LBS who will still be able to benefit from the project through a profit-sharing arrangement on a consolidated basis via the 74% stake in NWP in which LBS will have full management control over,” he said in a report yesterday.

He said it is possible for LBS to pare down its 60% stake in ZIC, but not until some value has been crystallised.

“If this materialises, it could trigger another round of special dividends and provide ammunition to LBS for further land-banking activities in Malaysia,” said CIMB Investment Bank Bhd analyst Ngo Siew Teng in a report, pointing out the special dividend paid out in 2013 following the disposal of two items in Zhuhai.

To recap, LBS signed a memorandum of understanding with Jiuzhou Holdings in September 2015 for the proposed upgrading of ZIC, which was approved by the Development and Reform Bureau of Gaoxin District in November 2017.

Under the approval, the ZIC will be divided into two plots, namely West Land — which will contain the China-Malaysia Cultural Centre, racing circuit amenities, a theme park, commercial area and tourist visiting tower — and East Land — which will encompass the Malaysia Cultural Village, business area, hotel block and shopping arcade.

 

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