Warrants Update: KSL-WA receives bonus boost

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SHARES of niche property developer KSL Holdings Bhd have doubled in the past six months, and thanks to its proposed one-for-one bonus issue, a number of its warrant holders chose to convert KSL-WA into ordinary shares.

Although KSL and KSL-WA will only trade ex-bonus issue on Dec 17, warrant holders who wanted KSL shares with the bonus entitlement have had to convert their warrants by the evening of Dec 8. From Dec 17, KSL-WA’s exercise price will also be adjusted from RM1.60 to 80 sen.

KSL-WA expires on Aug 19, 2016, and has a one-to-one conversion ratio. The bonus issue means holders of KSL-WA will be entitled to one additional warrant for every warrant held on the entitlement date, according to a Dec 10 announcement.

Closing at a cum-bonus price of RM2.47 last Wednesday, KSL-WA was trading at a 5.1% discount to the underlying stock, which ended at RM4.29 the same day.

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The owner of sizeable landbank in Johor and Klang, KSL was valued at RM6.63 per share by Kenanga Research. In an Aug 21 note, Kenanga says the developer’s fair value was already at a 50% discount to the RM13.26 apiece it calculated KSL’s assets could be worth. KSL’s net asset per share stood at RM3.87 as at end-September, and its recent share price high was RM4.97 on Sept 23.

 

On Dec 4, KSL managing director Khoo Cheng Hai @ Ku Cheng Hai bought 300,000 shares at RM4.15 apiece, raising his direct interest to 4.73%. He is also deemed interested in another 37.44% stake.

It is worth noting that KSL sold two million of treasury shares at RM4.44 apiece, or RM8.88 million in total, on Dec 1, leaving 2.54 million shares in its treasury.

It remains to be seen if investors will look past the price at which the treasury shares were sold.

In a recent interview with The Edge, KSL chairman Ku Hwa Seng said the company plans to launch RM6 billion worth of property projects in 2015 and 2016. Some of these developments will be spread over four to five years. As at end-September, unbilled sales stood at RM1 billion.

On top of its property developments, KSL receives steady income from KSL City Shopping Mall and KSL Resort in Johor, for which Ku sees room for rental increment in 2015. In the medium term, it is working to increase its recurring income from investment properties to 30% of total revenue from about 20% now.

KSL’s proposed dividend “shall remain at five sen per share after the completion of the bonus issue and should not be read as 2.5 sen per KSL share”, the Dec 10 announcement read.

This article first appeared in The Edge Malaysia Weekly, on December 15-21, 2014.