Eco World could join league of top developers

by **Cals** Mon 28 Apr 2014, 13:11

Business & Markets 2014

Written by Charlotte Chong & Adela Megan Willy of theedgemalaysia.com

Monday, 28 April 2014 09:08

SHAH ALAM: The corporate exercises that Eco World Development Group Bhd proposed last week could potentially propel the company into the league of top 10 developers in the country in terms of market capitalisation.

Analysts said the group’s market capitalisation is expected to be well over RM3 billion upon completion of the exercise, given its current market worth of RM1.37 billion and the fact that it is seeking to raise at least another RM2.2 billion from major and minority shareholders as well as a placement for new investors.

“But of course it is based on [the current] market price because we have not set the rights issue pricing and similarly the [proposed] private placement as well,” Eco World chief financial officer Heah Kok Boon told reporters during a press conference last Friday. However, he added that the proposed exercise would definitely make Eco World a medium-sized developer.

In terms of market capitalisation, UEM Sunrise Bhd currently takes the lead with RM10.71 billion, followed by IOI Properties Group Bhd (RM8.71 billion), S P Setia Bhd (RM7.5 billion), Sunway Bhd (RM5.39 billion) and IJM Land Bhd (RM4.79 billion).

Others such as Mah Sing Group Bhd (RM3.26 billion) and UOA Development Bhd (RM3.15 billion) are within the RM3 billion to RM4 billion range, while Tropicana Corp Bhd has a market capitalisation of RM2.15 billion.

Nevertheless, the lists do not include property heavyweights such as Sime Darby Property Bhd and Iskandar Waterfront Holdings Sdn Bhd, which are not publicly listed but are said to be considering such a route.

Eco World will definitely be a sizeable developer. Last Friday, it proposed to acquire two companies and the development rights of multiple projects from Eco World Development Sdn Bhd (EW Development) for a net total consideration of RM1.78 billion.

The latter is a private vehicle of Eco World’s major shareholders Tan Sri Abdul Rashid Abdul Manaf and Datuk Eddie Leong and Sinarmas Harta Sdn Bhd, whose shareholders were not mentioned.

The injection of these projects into Eco World would see the latter’s landbank triple to 4,433 acres (1,793.97ha) from 1,326 acres currently, and its total gross development value (GDV) increase to RM43.5 billion from RM13.5 billion.

Eco World president and chief executive officer Datuk Chang Kim Wah pointed out that with 11 projects in the pipeline waiting to be launched from next year onwards, Eco World is expected to be “kept very busy for 8 to 10 years”.

Chang said the integration of the listed firm and EW Development will be completed within six months. Meanwhile, the group is expected to rake in sales of RM5 billion in financial year 2014 (FY14) and FY15.

“[For FY14], we aim to achieve sales revenue of RM2 billion, while the remaining RM3 billion will be accomplished [in FY15],” he said, adding that the combined figures will come from its upcoming projects.

On the possibility of expanding their business overseas, Chang said they will only begin planning when the “right time and right opportunity comes”. “We have been approached by several companies to do ventures. Then again, we will only be able to evaluate [such offers] based on their merits,” he added.

At this juncture, Eco World’s largest shareholder is Liew Tian Xiong with a 35.05% stake, followed by Eco World Holdings Sdn Bhd (EW Holdings) with 30.01%. EW Holdings is a vehicle of Abdul Rashid and Leong, both of whom had served on the board of S P Setia and are deemed to be close to Tian Xiong’s father, Tan Sri Liew Kee Sin.

Nonetheless, Tian Xiong’s stake will be diluted following the subscription of new shares worth RM1.37 billion by EW Holdings and Sinarmas Harta, before the rights issues for the shareholders.

Upon completion of the exercises, Eco World’s major shareholders will comprise EW Holdings with a 35.24% stake, Sinarmas Harta (25.6%) and Tian Xiong (11.27%).

The senior Liew is about to step down as president and chief executive officer of S P Setia on April 30.

This article first appeared in The Edge Financial Daily, on April 28, 2014.