Friday, March 3, 2017

IWCITY's deal seems scary but it may not be an Ekovest

There seems to have a chance where IWCITY will be selling its land for over RM2 billion as it has announced a suspension of its stocks. I think it is a 99% chance it will be a done deal.

This is very good for all IWCITY shareholders as the land that has book value of less than RM150 million will be sold for RM2.37 billion (that's a B). Overall, as mentioned in the accounts (subject to change of this new announcement), the profit will be RM1.2billion.

IWCITY's share had run up to RM1.64. Coincidentally, it is going to include another 87 million shares on 6 March 2017 (that day it will be suspended) which was issued for 90 sen (mind boggling) for land in 2 different deals. (For people who wants to know why it is not right, please read Warren Buffett's latest 2016 letter where he mentioned his mistakes of issuing shares for some of his deals)

Hence, the total shares that IWCITY will have is 823,699,857. With that, IWCITY's new market cap will be RM1.35 billion.

Just look at below announcement.

At RM1.35 billion, despite the deal at RM2.37 billion, it is not that cheap as a share. In the sale, if there are not major change, IWCITY is also to spend some RM500 million for the transfer i.e. conversion etc. Unless of course IWCITY decides to issue a huge dividend in the form of around RM1.00 per share. That I will take it.

In all the deals, it looks like IWCITY is a land trader than a real business concern. Ekovest on the other hand, has built itself to have a long runway for it to grow - i.e. from its concession businesses and to a certain extent building into a much bigger construction outfit.

Additionally, there are a substantial number of property companies that are trading well below their book value - among them Sime Darby (especially Sime Properties after the split), Tropicana and many more small companies.

I would like to highlight that IWCITY has issued a 10% placement last year at RM0.90 as below. It certainly diluted its shares at cheap.

Well, until the full announcement is made, I am not going to make much assumptions.


Unknown said...

With the recent proposed share swap between IWCITY and IWH, how should we value IWCITY shares going forward? I believe it will become a large property developer whereby large institutional investors will want to get a pie of it.

felicity said...

Potentially now that it is including Bandar Malaysia