Tuesday 19 Mar 2024
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This article first appeared in The Edge Financial Daily, on February 21, 2017.

 

KUALA LUMPUR: Eco World International Bhd (EWI), the overseas property arm of Eco World Development Group Bhd, is hoping for a “fair and reasonable” valuation for its upcoming initial public offering (IPO) which it says has garnered strong preliminary interest.

“The response that we have received so far has been good. Investors are optimistic but I cannot comment beyond that as we are entering the final stage of the book-building process,” said EWI president and chief executive officer (CEO) Datuk Teow Leong Seng.

“I hope the final price will be attractive, with a fair and reasonable valuation,” he told reporters yesterday after the signing of three agreements to commence the IPO process.

Teow said he is confident that the two joint principal advisers, Maybank Investment Bank Bhd (Maybank IB) and CIMB Investment Bank Bhd (CIMB IB), will arrive at “the right price” for the IPO that is slated to take place in the first week of April.

In a circular to its shareholders, EWI has come up with an illustrative IPO price of RM1.20, which is at a 12% premium to its net asset per share of RM1.07.

At RM1.20, valued at 1.12 times its book value, EWI estimates that its market capitalisation will be RM2.88 billion.

The agreements signed yesterday included a master cornerstone placement agreement with the Employees Provident Fund (EPF) and Permodalan Nasional Bhd (PNB) whereby the two institutions will subscribe for 140.4 million shares, out of the 449.5 million new shares allocated under the IPO’s institutional offering. The 449.5 million shares represent 18.7% of EWI’s enlarged share capital.

“We also anticipate a high subscription rate from our other institutional investors such as mutual and insurance funds,” said Teow.

EWI also signed an agreement with six banks — Maybank IB, CIMB IB, Hong Leong Investment Bank Bhd, Alliance Investment Bank Bhd, AmInvestment Bank Bhd and RHB Investment Bank Bhd — for the banks to underwrite 480 million shares in the retail portion that is equivalent to 17% of the enlarged capital base.

The third agreement inked yesterday was a share subscription agreement with GuocoLand Ltd for the company to take up a 27% stake in EWI’s enlarged capital. This agreement is a follow-through on the shareholders’ agreement dated Oct 27, 2016 between Eco World Development Group, GuocoLand and Eco World Development chairman Tan Sri Liew Kee Sin to regulate their relationship with one another as major shareholders of EWI going forward.

“Now that we have inked the three key agreements, which together with Eco World Development’s subscription agreement covers around 85.6% of the new IPO shares, we can confidently say that the IPO is off to a very good start,” said Teow.

Under the IPO, EWI proposes to issue 2.153 billion shares, and expects to raise gross proceeds of RM2.854 billion.

Of this, 48.4% or RM1.252 billion will be used for working capital and land acquisition purposes, while another 48% or RM1.241 billion will be used to repay bank borrowings, which are denominated in ringgit, British pound sterling and Australian dollar. The remaining amount will be used for listing expenses and other related purposes.

Teow expects EWI to start paying dividend to its shareholders from the financial year ending Oct 31, 2019.

“At this moment, we have not formulated any formal dividend policy. But once we start to recognise sales from our projects in the United Kingdom and Australia by 2018, and subject to our cash flow position, we hope to be able to declare dicidends to our shareholders,” he said.

EWI owns some 12 acres (4.9ha) of land in London and Sydney, with property projects having a total gross development value of RM12.96 billion.

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