Privatisation offer for IJM Land fair and reasonable, says HLIB

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KUALA LUMPUR (Jan 19): IJM Corp Bhd’s offer to privatise IJM Land Bhd at RM3.55 per share is “fair and reasonable”, says independent adviser Hong Leong Investment Bank (HLIB).

HLIB recommends the shareholders of IJM Land (fundamental: 2.2; valuation: 1.8) to vote in favour of the privatisation exercise, after taking consideration the valuation of the proposal.

Under the privatisation proposal, IJM Corp (fundamental: 1.6; valuation: 2.4) has valued IJM Land at RM3.55 per share, which will be satisfied by an issuance of 0.5 ordinary share of IJM Corp at RM6.66 each, plus a 22 sen cash consideration for every IJM Land share.

The total consideration for IJM Corp to take over the remaining 35.85% stake in IJM Land it doesn’t control, is approximately RM1.98 billion.

IJM Land will hold an extraordinary general meeting (EGM) on Feb 12, 2015, to deliberate the matter.

In an independent adviser letter today, HLIB said the valuation on the fairness of the offer is carried out using the Revised Net Asset Value (RNAV) method, a commonly used valuation methodology for valuation of asset-based companies.

It found that the RNAV for IJM Land is approximately RM5.618 billion, which translates to an RNAV per share of RM3.60. Hence the officer price of RM3.55 would represent a 1.39% discount.

The independent adviser urged the shareholder to take into account the 22 sen cash consideration, when assessing the fairness of the offer price.

Based on the historical market price of IJM land's share, the share price had traded below the offer price of RM3.55 for the past three years.

"We are of the view that the proposed privatisation presents an opportunity for the scheme shareholders to exit their investment in IJM Land at a premium to its historical market prices, in exchange for the cash consideration and the IJM Corp shares,” HLIB said.

IJM Corp had received blessing from its shareholders to go ahead with the privatisation plan on an EGM held on Jan 8.

IJM Land closed 2 sen higher at RM3.40 today, giving it a market capitalisation of RM5.269 billion.

(Note: The Edge Research's Fundamental Score reflects a company’s profitability and balance sheet strength, calculated based on historical numbers. A score of 0 means weak fundamentals and a score of 3 means strong fundamentals. Meanwhile, the Valuation Score determines if a stock is attractively valued or not, calculated based on historical numbers. A score of 0 means valuations are not attractive, while a score of 3 means valuations are attractive.)