Tuesday, August 13, 2013

Kumpulan Euro and IJM: True to my fear

I have feared for this in my previous article and it is true. In fact by reading through the below reason for the RM52.5 million valuation on a 10% of Radiant Pillar, I do not get the value. It is a a piece of poorly explained justification. Another thing, it is not so much willing buyer, willing seller - my last research was that IJM has about 21% of Keuro. On top of that Tan Sri Chan Ah Chye has already signed a Share Sale Agreement to sell a 22% stake. Based on that, IJM is the largest shareholder, assuming MWE is not in discussion in this sale as it has not completed the purchase. Are we also saying Chan Ah Chye is agreeing to the sale of the 10% considering he is going to be selling out a major chunk of his stake anyway.

Does not matter on the NA but in any case I do not know how the RM50 million is derived

The sale of 10% of Radiant Pillar firstly allows IJM to have controlling stake of Radiant Pillar hence allowing it to consolidate in its account. For a controlling stake, it should not be based on the total value of the piece of property. A controlling stake is on a premium pricing - any deal maker would know that. On top of that it is a piece of land which is situated in the south Klang Valley. It is not going to be worth RM1.3 billion if the developer has been approved for a RM12 billion project especially when the costs of the land is almost nil.

Based on above, I do not know how the 10% or equivalent to RM50 million of the effective NA (for 10%) is derived. Based on my calculation, the 10% of Radiant Pillar is effectively 7% of the Rimbayu land and based on that, the piece of land is worth RM753 million (100/7 x RM52.5 million) according to the selling price.

On top of that, in a S&P, one do not include the tax liabilities into a valuation considering that future sale of properties would have profited the company anyway. The valuation of Rimbayu should be based on future value, not current NA value. These are all flawed valuation and reasoning.

I am also not too sure the going to be appointed independent advisor would be that independent as you can see that the advisor of this deal had previous connection to Hong Leong Investment as the founder / director of Newfield Advisor is Seow Lun Hoo, a once President of Hong Leong Credit (for many years in fact).

I know that the sale would have netted some needed amount for the West Coast Expressway project, but this is not the point I am saying here. The sale is too low a price to IJM and we are not clear on the plan as Keuro is to do a rights issue anyway. RM52.5 million from a sale which allows controlling stake is a meagre sum.


Kalasou said...

Tan Sri Chan Ah Chye not a good image "players"...If like u said so, he will sold the stake to IJM, which mean the share price will move, can consider to buy some and keep. This stock still under value?

felicity said...

You bet.

Kalasou said...

Long-term should be not a problem. because govt wont let go a fresh meat to their citizen. But it would take ,how "long"! is a issue I consider. just worry miss out something like (airport).