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Friday, August 29, 2014

Shareholders to gain from I-Berhad exercise


MINORITY shareholders of I-Berhad stand to benefit from the company’s corporate exercise due to attractive pricing of its rights issue and irredeemable convertible unsecured loan stock (ICULS).

The company on Wednesday announced details of the fundraising scheme involving rights issue, bonus issue and landbank acquisitions.

I-Berhad will raise approximately RM699.8 million, comprising RM197.5 million in proceeds from the rights issue and RM502.3 million from issuance of convertible securities of redeemable convertible unsecured loan stock (RCULS) and ICULS to the vendor of the acquired lands.

The rights issue entitlement entails five rights shares for every four existing ordinary shares held by shareholders on entitlement date of September 11 at an issue price of 69 sen per rights share and one free warrant for every five rights shares subscribed.

The rights issue price of 69 sen is approximately 47 per cent discount to the theoretical ex-rights price of RM1.30 for I-Berhad shares.

At the same time, the vendor of the lands will offer for sale approximately 48 per cent of the ICULS to the minority shareholders of
I-Berhad at an offer price of 50 sen per ICULS, on the basis of five ICULS for every one existing share held on entitlement date.

The ICULS are convertible to I-Berhad ordinary shares any time within the five-year tenure at a conversion price of 68 sen, or 136 ICULS in exchange for 100 new ordinary shares.

“The corporate exercise aims to enhance shareholder value, not just by raising our valuation multiples as we position ourselves in the league of property developers with more than RM1 billion market capitalisation, but also rewarding our minority shareholders with extremely attractive pricing of our rights issue and ICULS to further participate in the growth potential of I-Berhad,” said I-Berhad chief executive officer Datuk Eu Hong Chew.

Meanwhile, SJ Securities Sdn Bhd rated
I-Berhad as a “buy” with a RM4.40 fair value on strong earnings growth.

“I-Berhad’s current unbilled sales of RM400 million will underpin future earnings. We see impending strong earnings growth from financial year (FY) 2015 onwards, with Grand i-Residence providing the earnings kicker.

“Our back-of-envelope calculation estimates that I-Berhad will achieve core FY 2015 earnings per share (EPS) of 55 sen based on following assumptions, i.e. RM200 million revenue for property development division and RM55 million revenue for leisure division and a net profit margin of 25 per cent.

“We arrive at our indicative fair value of RM4.40 based on estimated FY 2015 EPS, attaching a price-earnings of eight times, which is the earnings multiple that small cap property stocks are trading at,” SJ Securities said in its report.

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