Friday 3 February 2012

Tebrau rises, seen as exciting Johor proxy

KUALA LUMPUR: Tebrau Teguh Bhd’s shares jumped 7 sen or 9.3% to close at 82 sen when trading on the stock resumed yesterday following the announcement of a proposed general offer exercise.

This places the stock 7.9% ahead of the takeover offer price of 76 sen, which analysts say is unlikely to spark a high take-up rate.

Tebrau was the latest in a flurry of privatisation and takeover exercises over the past two weeks, which included Proton Holdings Bhd, Glenealy Plantations Bhd and Lingui Developments Bhd.

Tebrau’s privatisation exercise, however, does not offer a significant premium for minority shareholders. The offer price is just one sen above the pre-suspension price of 75 sen, and the current price is much higher.

And while Proton’s share price doubled in the weeks leading up to the exercise, Tebrau’s shares have traded within a tight range of between 67 sen and 77.5 sen over the last three months.

It is also almost squarely at Tebrau’s net assets per share of 75 sen as at Sept 30, 2011, which analysts say is undervalued, given its large landbank in Iskandar Malaysia, the country’s latest property hotspot.



Although the exercise could see a poor take-up rate as a result of these factors, market observers also concur that Tebrau could be headed for better times as investors start taking notice of its large landbank and the possibility of further corporate developments with the entry of tycoon Datuk Lim Kang Hoo of Ekovest Bhd.

Tebrau is being taken over by Iskandar Waterfront Holdings Sdn Bhd (IWH), which is buying a 33.15% stake in the company from Kumpulan Prasarana Rakyat Johor Sdn Bhd (KPRJ) for RM168.7 million.

KPRJ, the Johor state investment arm, will remain a major shareholder of Tebrau as IWH is owned by KPRJ and Credence Resources Sdn Bhd, a company controlled by Lim.

With the collaboration between Lim and the state investment entity, analysts think Tebrau could potentially be a stock to watch for exposure to Johor.
An inkling of that came at the same time the takeover offer was announced.

Tebrau announced that it had been appointed by the Johor government to develop 413 acres in Pengerang to complement an oil and gas hub there.

Analysts also note that Tebrau’s book value of 75 sen per share looks understated, given that the bulk of its land was last revalued nine years ago.

The jewel in the company is its landbank in Iskandar, which according to its 2010 annual report, measures about 413.534ha (1,022 acres) and has a book value of RM591.93 million, based on 2003 prices.

This values the land at RM579,278 per acre, or RM13.30 per sq ft, a price which market observers note may be on the low side, given that land values there have appreciated substantially over the past nine years.

An analyst said assuming the price has risen 50% to RM20 psf, Tebrau could be sitting on potential revaluation gains of RM296 million.

Based on Tebrau’s issued base of 669.73 million shares, those potential revaluation gains could be worth 44 sen on top of the company’s current book value of 75 sen per share, he estimated.

Lim’s entry into Tebrau also raises speculation that some of his privately owned assets, such as Danga Bay Sdn Bhd (DBSB), may be injected into the company later.

DBSB owns Danga Bay, and is one of the largest owners and developers of sea-fronting projects in Johor.


This article appeared in The Edge Financial Daily, February 3, 2012.



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