IJM Land will be privatised by IJM Corp at an offer price of MYR3.55, to be satisfied via 20 sen cash and issuance of 0.5 new IJM Corp shares at MYR6.70. The offer price translates into 13-14x P/E and 1.7x P/BV, ie 12-15% higher than industry average valuations and only 4% below our RNAV/share. We advise investors to accept the offer. In view of the corporate exercise, we revise our FV to MYR4.15 (from MYR3.70).
- MYR3.55 offer price for IJM Land. IJM Corp (IJM MK, BUY, FV: MYR7.90) will privatise IJM Land at an offer price of MYR3.55/share.This will be satisfied via 20 sen cash and issuance of 0.5 new IJM Corp shares at MYR6.70/share. The key reason for the privatisation was funding limitations that IJM Land had been experiencing, particularlywhen undertaking sizeable property projects. Therefore, by consolidating, IJM Land can leverage on IJM Corp’s balance sheet. The acceptance of the offer will be by way of poll at an EGM, which will be convened after a board meeting and the approval for the clearance of explanatory statement by the Securities Commission. The exercise is expected to take about 6-7 months to complete.
- Let it go. We advise investors to accept the offer. Although we will have one less large cap quality developer stock for sector picks, and investors will need to buy IJM Corp to get exposure to IJM Land, we view the valuations of the exercise as fair. The offer price has a small cash component as a sweetener and is just 4% below our estimated RNAV/share of MYR3.70. At MYR3.55, this translates into 13-14x FY14-15 P/E, and 1.7x FY14 P/BV, about 12-15% above the industry average.Also, although slightly lower than the MYR3.65 offer price during the proposed merger with Malaysian Resources Corp (MRC MK, BUY, FV: MYR1.82) in Nov 2010, the combination of cash/shares offer was not determined then. The valuations multiples at the time were much higher at 25x P/E and 2.4x P/BV, as it was during the sector upcycle and right at the onset of te US’ quantitative easing programme. The deal subsequently fell through as an agreement on definitive terms could not be reached.
- Raised FV to MYR4.15. IJM Land has been our sector Top Pick. In light of the latest development, we now peg our valuations to our valuations of IJM Corp, which suggests a new FV of MYR4.15 (0.5 of MYR7.90 plus 20 sen cash). Maintain BUY. We now pick Sunway (SWB MK, BUY, FV: MYR3.60) as our Top Pick and new proxy to the local property sector.
Conditions to the privatisation offer
For the deal to go through, however, the following approval thresholds will need to be satisfied:
For the deal to go through, however, the following approval thresholds will need to be satisfied:
(i) At least 75% in value of scheme shares (minority shares)
(ii) 50% or more in the number of shareholders
(iii) Less than 10% shareholders voting against the resolution (in value of scheme shares)
Source: RHB
Source: RHB