KUALA LUMPUR (June 30): Property developer UEM Sunrise Bhd announced that its wholly-owned unit UEM Land Bhd and Bandar Nusajaya Development Sdn Bhd (BND) has signed a sale and purchase agreement with its major shareholder UEM Group Bhd to dispose of Imperia Building in Iskandar Malaysia, Johor, for RM137.8 million.
The disposal is part of UEM Sunrise’s plan to unlock the value of its assets and to raise funds to redeem the 450 million redeemable convertible preference shares (RCPS) that was issued by BND to UEM Group, said UEM Sunrise in its filing with Bursa Malaysia today.
“The RCPS will be automatically converted into ordinary shares of RM1 each upon its maturity on Nov 27, 2015 if they are not redeemed, resulting in UEM Group having a direct stake in BND.
“Given that BND is expected to significantly contribute to the future earnings of the UEM Sunrise, the board is of the view that it would be in the best interest of UEM Sunrise to raise funds for the redemption of the RCPS,” said UEM Sunrise.
Imperia Building’s selling price represents a 4.2% premium to the market value of RM124.8 million, as appraised by Knight Frank Malaysia Sdn Bhd, said UEM Sunrise in a filing with Bursa Malaysia this evening.
It consists of a 16-storey office tower with a 3-storey podium car park and 7 retail lots, together with 13 retail lots on the ground floor of a service apartment block and 251 basement car-park bay, with the total strata parcel area measuring 429,235 sq ft.
Currently, UEM Sunrise said the Imperia Building is 98% completed, with an expectation to end-July 2015. Once completed, it is expected to generate an annual rental income of some RM12 million.
UEM Sunrise expects to net some RM16.2 million in disposal gain, which will be reflected in its earnings for the financial year ending Dec 31, 2015. The disposal is also expected to pare down its gearing to 0.33 times from 0.37 currently.
“The Audit Committee is of the opinion that the proposed disposal is in the best interest of UEM Sunrise; fair, reasonable and on normal commercial terms; and not detrimental to the interest of the minority shareholders,” it said.
UEM Sunrise (fundamental: 1.5; valuation: 2.6) expects to complete the disposal by the third quarter of 2015.
UEM Group, which is wholly-owned by Khazanah Nasional Bhd, has a 66.1% stake in UEM Sunrise.
The stock has fallen by 47% from RM1.85 on Nov 25, 2014, to close at 98 sen today, giving it a market capitalisation of RM4.537 billion.
(Note: The Edge Research's fundamental score reflects a company's profitability and balance sheet strength, calculated based on historical numbers. The valuation score determines if a stock is attractively valued or not, also based on historical numbers. A score of 3 suggests strong fundamentals and attractive valuations)