ISKANDAR Waterfront City Bhd (IWC) is expected to announce a major corporate exercise this week after requesting a suspension in trading last Friday.

The follows a surge in IWC’s share price to as high as RM1.77 last Friday before it closed at RM1.64 — more than double what it was trading at a month ago.

Speculation of potential corporate exercises has fuelled trading interest, in particular, the possibility that IWC will play a role in the listing of its 47.2% parent, Iskandar Waterfront Holdings Sdn Bhd (IWH), such as using IWC as a vehicle for a backdoor listing of IWH.

It is well known that IWH has been pursuing a public offering as far back as 2013. IWC executive chairman Tan Sri Lim Kang Hoo, who owns a 63.1% stake in IWH, recently reiterated his intention to list the latter.

He could not be contacted for comments and is understood to be overseas at the time of writing.

A major stumbling block to the listing has been the high expectation of the group’s promoters in the valuation of its 4,300-acre land bank in Iskandar, Johor.

IWH has also carried out some massive acquisitions. Last year, the group acquired a 60% stake in 1Malaysia Development Bhd’s 486-acre Bandar Malaysia development via a 60:40 joint venture with China Railway Engineering Corp (CREC).

The IWH-CREC joint venture paid RM7.41 billion to acquire the Bandar Malaysia land.

Not surprisingly, there has been growing pressure on IWH to undertake a listing to raise funds.

Against this backdrop, it is not immediately clear how IWC will be able to play a role. There is speculation that the Bandar Malaysia asset could be injected into IWC.

However, due to IWC’s small balance sheet, such an exercise would likely  involve a share swap.

After all, IWC only had a net asset value of RM597.4 million as at Dec 31, 2016. It doesn’t have that much cash on its balance sheet either — only RM49.4 million against RM142.4 million in borrowings.

However, note that IWC is still in the process of completing the disposal of 128 acres of mixed-use waterfront development land to China’s largest property developer, the Greenland Group, for RM2.37 billion.

The deal was inked in April 2015 and would have booked a RM1.6 billion pre-tax gain on disposal for IWC. However, IWC has postponed the final cut-off date to conclude the deal multiple times. The most recent extension, announced on Jan 28, extended the date to March 2.

As at the time of writing, it is not clear if Greenland and IWC have concluded the deal or agreed to another extension.

Hence, it has also been speculated that the corporate exercise could involve the disposal of land to Greenland.

After all, the disposal should translate into a gain of RM1.89 per share for IWC. This does not even take into account the potential profit sharing by IWC from its remaining 20% stake in the development.

Note that Greenland will jointly develop Tebrau Bay Waterfront City with IWC in an 80:20 partnership.

Against this backdrop, it will be interesting to see how Lim will unlock the value in IWC and IWH going forward. It would certainly be another feather in his cap, coming hot on the heels of the RM1.13 billion that Ekovest Bhd raised by disposing of a 40% stake in the Duta-Ulu Kelang Expressway to the Employees Provident Fund.

Lim controls a 32.4% stake in Ekovest via his vehicle, Credence Resources Sdn Bhd.

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