KUALA LUMPUR (May 4): UOB Kay Hian expects Iskandar Waterfront City Bhd (IWCity) shares to be significantly impacted, unless a firm signal of a reversal of the Bandar Malaysia sale termination emerges before IWCity shares re-commence trading next week.

Trading in IWCity shares are suspended today and tomorrow at the company's request.

"Negative sentiment could also spill over to IWCity's sister companies, eg Ekovest Bhd (buy on weakness, target: RM1.55), although any significant weakness in Ekovest should create the opportunity to accumulate," said UOB Kay Hian.

The research house said there would be negative pressure on IWCity shares due to concerns that the IWCity-Iskandar Waterfront Holdings Sdn Bhd (IWH) merger deal could be delayed or there could be a merger without IWH's part ownership in Bandar Malaysia.

It added that such knee jerk reaction would significantly dilute the merger benefits and could send IWCity's share price plunging.

On March 17, IWCity had received a proposal from IWH which would see IWH taking over IWCity's listing status.

UOB Kay Hian said that in the near term, investors may well ignore the potential valuation synergy from the IWCity-IWH merger, without the Bandar Malaysia factor.

"Assuming that Bandar Malaysia is excluded from the deal, the merged entity (IWCity-IWH) still holds about RM29.7 billion (RM5.10/share) worth of landbank, based on open market value and not based on the discounted cash flow (DCF) of development profits.

"However, given that these lands are located in Johor Bahru, where property market sentiment remains depressed, the market's appreciation of values may be capped," added the research house.