IGB Corp downgraded to ‘neutral’ after Goldis 'unattractive' bid

by **Cals** Tue 22 Jul 2014, 01:27

IGB Corp downgraded to ‘neutral’ after Goldis 'unattractive' bid
Business & Markets 2014
Written by Ahmad Naqib Idris Adzman Shah of theedgemalaysia.com
Monday, 21 July 2014 11:22

KUALA LUMPUR (July 21): Public Investment Bank Bhd (PublicInvest) has downgraded IGB Corp Bhd to “neutral” from “outperform” with a target price (TP) of RM2.88, deeming the takeover offer by Goldis Bhd as “unattractive”.
Last Friday, Goldis announced its takeover offer for IGB to raise its equity interest in the property firm at RM2.88 per share, which represents a premium of four sen or 1.4% to its RM2.84 closing price at July 17.

In a note today, PublicInvest said Goldis’ offer was at a premium of less than 10% of IGB’s one-year volume weighted average market price, which is unattractive to IGB’s shareholders.

“The deal, which is pricing the equity value of IGB at RM3.84bn, is substantially undervaluing the assets of IGB which we estimate to be worth at least RM8.0bn or RM5.85/share.

“The speculation to buy the 30.66% stake in Goldis, has now turned into buying IGB outright at an unattractive pricing by the controlling shareholders, is a negative surprise,” said PublicInvest in a note today.

The research house says the offer price does not impute value from future assets such as MidValley SouthKey, Southpoint, IGB International School, hotels, and other hotels and development projects with a potential gross development value of RM10 billion.

PublicInvest has valued these future projects at approximately RM3 billion to RM4 billion or RM2.23 to RM2.97 per share after completion to IGB.

“Recall the Selangor Properties Bhd made RM2.40 in August 2005 to buy over the shares not owned by the controlling shareholders, which was then also perceived as undervaluing the assets.

“Selangor Properties was last traded at RM6.50/share (excluding the dividends paid over the years). Hence, we believe the offer from Goldis, if anything, is showing that there is much value in IGB,” said the research house.