This article first appeared in The Edge Malaysia Weekly, on December 21 - 27, 2015.
THE privatisation of IJM Land Bhd by its holding company IJM Corp Bhd most probably made the former’s shareholders happy. The offer price of RM3.55 a share — satisfied by the issuance of 0.5 ordinary share in IJM Corp at RM6.70 apiece for every one IJM Land share held, and 20 sen in cash — gave shareholders a chance to cash out of the relatively illiquid IJM Land and tap into the diversified business streams of IJM Corp.
Prior to the privatisation, IJM Corp held 64.15% equity interest in IJM Land. Shares of IJM Land were thinly traded over the last
12 months, with the daily trading volume making up only 0.06% of IJM Land’s issued and paid-up share capital.
Unsurprisingly, the privatisation proposed received close to a unanimous vote from IJM Land’s shareholders, with 99.11% agreeing to it. It provided minorities with an exit from a pure property stock — the breed of stocks that is currently out of favour.
The cash portion was later increased to 22 sen per share as IJM Corp had distributed to its shareholders an interim dividend, which IJM Land’s shareholders were not entitled to at that point in time.
The deal, which amounted to RM1.98 billion, is the third largest in Malaysia by value, according to Bloomberg’s transaction league table for 2015. It was completed in April.
The offer price of RM3.55 apiece represented a premium of nearly 15% to the five-day volume weighted average market price. It was also 13.06% more than the adjusted closing price of IJM Land shares of RM3.14 on the last trading day before it received the proposal letter from IJM Corp.
In terms of valuation, it stood at a price-earnings multiple of 17.22 times and price-to-book multiple of 1.68 times.
The privatisation of IJM Land gave IJM Corp greater freedom to plan and decide on the strategic and future business direction of IJM Land, according to IJM Corp’s principal adviser Maybank Investment Bank Bhd.
It seems to be a win-win deal for both companies. As a wholly-owned subsidiary of IJM Corp, IJM Land can leverage its parent company’s financial standing and resources to spur future growth.
IJM Corp, meanwhile, will see its earnings enhanced through the full consolidation of IJM Land with its portfolio. IJM Land, which is principally involved in property development, construction, hotel operations and investment holding, has seen its earnings grow over the years. Its net profit for the financial year ended March 31, 2014 (FY2014), grew to RM533.23 million from RM193.71 million in FY2012. Revenue nearly doubled to RM2.05 billion from RM1.21 billion during the same period.
IJM Land, which has a landbank of 4,800 acres, has established a foothold in prominent locations across Penang, Kuala Lumpur, Selangor, Negeri Sembilan, Johor, Sabah and Sarawak. It is also undertaking projects abroad in places such as central London in the UK, Vietnam and China.
Its shareholders can now benefit from being a part of the conglomerate while not missing out on the future growth of IJM Land.
IJM Corp’s core business activities include construction, property development, manufacturing and quarrying, infrastructure concession and plantation. It is set to benefit from the mega infrastructure projects under the Economic Transformation Programme. So far, IJM Corp has participated in the mass rapid transit project and the recently launched West Coast Expressway project.
For the cumulative six months ended Sept 30, 2015, IJM Corp’s net profit doubled to
RM493.25 million from RM244.87 million a year ago. This was despite a 5.4% year-on-year fall in revenue to RM2.52 billion.
The decline in revenue was attributed to weaker contributions from the group’s property and plantation divisions while the increase in net profit was due to a one-off gain from the disposal of its 74% stake in Jaipur-Mahua Tollway Pvt Ltd amounting to RM168.7 million.
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