New personalities behind Eco World and Malaysia Aica

If there are any new property companies worth watching out for in 2014, the two that most outwardly stand out would be Eco World Development Bhd and Malaysia Aica Bhd (Maica).

Both are interesting not just because of the new and dynamic personalities behind them, but due to their relative nimbleness and the early stages of growth they are currently in.

Both companies are in the expansion phase and appear to be in the process of building up their war chest for future acquisitions.

The interest in these companies are evident as seen in their respective share price. Those counters have surged significantly since the new personalities came into the picture.

Mention Eco World, and people immediately think of iconic S P Setia founder Tan Sri Liew Kee Sin.

Maica also has an interesting new face – Datuk Ter Leong Yap, who is most famed as president of the Chinese Chambers of Commerce and Industry in Kuala Lumpur and Selangor.

While Eco World’s share price has appreciated 238.57% to RM4.74 since former SP Setia top brass first made a takeover offer last October, Maica’s share price has risen some 80% since a mandatory takeover offer by Ter was made in January this year.

Eco World took over the listing status of Focal Aims Bhd, while Sunsuria Development Sdn Bhd’s property business is being injected into Maica. An application to change Maica’s name to Sunsuria Bhd has been approved.

Going forward, fund managers reckon that Eco World will need to raise funds as it injects more land from its private entity into the listed entity.

“With Liew in the foreground, do not expect Eco to be a mid-league property company. If anything, Eco World will likely be one of the big boys in the not so long term,” remarks one fund manager.

Maica started the fundraising party rolling on Friday, when it announced a rights issue which consists of three rights share and one free warrant for every one mother share. Ter is underwriting his 50.11% portion while the open portion is fully underwritten by bankers.

This exercise will raise some RM300mil based on its illustrative pricing example of 65 sen per rights share. This is a significant sum which exceeds Maica’s present market capitalisation of RM224mil.

“Raising such big amounts is not easy under current market conditions. A company that can raise equity money in this sort of period, will survive and squeeze into the next billion dollar league table,” one observer remarks.

Eco World

Eco World, which is made up of former S P Setia top brass, has the invisible imprint of the latter’s founder and former boss Liew all over the company.

Can we expect anything less than the S P Setia sort of growth, delivery and quality with Liew’s standards imprinted within the Eco group?

In less than four months since the takeover of Focal Aims was completed, Eco World’s market capitalisation has already tripled to RM1.2bil.

As it is, the listed entity only owns one asset, which is 128ha in Canal City, Selangor which it purchased from Tropicana Corp Bhd for RM470.67mil.

The other projects in Eco World, for instance its EcoBotanic and EcoSpring in Iskandar Malaysia, are currently under its private arm, Eco World Development Sdn Bhd.

Eco World, the private arm, has seven development projects in the country’s three property hotspots – the Klang Valley, Penang and Iskandar Malaysia, Johor.

It has 1,14.06ha of undeveloped land in the country, out of which some 1,000 acres are located in the Klang Valley, 404.69ha in Penang and the rest in Iskandar Malaysia.

Analysts estimate that the projects that are under the private arm, have a gross development value of some RM30bil.

Eco World Development Sdn Bhd is 50% owned by Eco World Development Holdings Sdn Bhd (formerly known as Maple Quay Sdn Bhd), which in turn owns 30.01% of Eco World Development Group Bhd.

Both the listed and unlisted entities of Eco World are now helmed by former S P Setia Bhd executive director Datuk Chang Khim Wah.

The listing of Eco World came about when Liew’s eldest son, Tian Xiong and Eco World Development Holdings Sdn Bhd made an unconditional takeover offer of Focal Aims for a cash offer price of RM1.40 per share last October. The takeover offer closed on Nov 12 with the offerors owning 65% of the company.

Tian Xiong is a major shareholder and executive director in Eco World.

Maica

Meanwhile, Sunsuria Development Sdn Bhd group founder and executive chairman Ter was thrust into the limelight when he served a notice of a mandatory general offer to Maica’s largest shareholder Tan Sri Robert Tan Hua Choon in January.

Ter, who now owns 17.37%, is proposing to take his stake in the company to 50.11% once buying out Tan and three others from the company.

The reason for doing so is to turn the maker of wooden and fire-rated doors into a property developer, and that move has been given the nod from minority shareholders at an EGM on Jan 20.

So far, Sunsuria has injected two pieces of land worth some RM56mil in Bukit Jelutong into Maica. One is for a RM25mil commercial development project known as Trivo, Suria Jelutong which comprises 30 units of double-storey shop offices together with infrastructures. On the second plot of land which is worth RM31mil, Sunsuria is looking to build service apartments with a GDV of some RM260mil by year-end.

The catalyst for Maica is that Ter is likely to inject three major property developments into the company valued at about 10% of its estimated GDV of RM10bil.

PublicInvest has highlighted that the three major developments are the 300 acres in Salak Tinggi, (adjacent to the upcoming Xiamen University Malaysia Campus), 82 acres in Medini, Johor and 21 acres in Setia Alam, Selangor.

Currently, based on independent advisor AmInvestment Bank Bhd, the indicative revised net asset value (RNAV) of the Maica group ranges from RM138.26mil to RM146.16mil, or about 87 sen to 92 sen per Maica share.

Meanwhile, with the new land injection from the Sunsuria Group, UOB KayHian has a ballpark RNAV calculation in excess of RM944mil versus the current land value of RM224mil. This implies a potential value enhancement of RM720mil.

“The three plots of land, which has GDV of about RM10bil with development period ranging from five to eight years, will generate about RM700mil (or about RM1.10 per share) in net surplus value to the group in our estimates,” said PublicInvest.

The research house understands that the group has plans to accelerate its launches to sell at least RM1bil a year in the next one to two years.

“With that, we estimate the group’s net earnings could potentially hit RM150mil in the next two to three years from an average of less than RM2mil per annum currently,” said PublicInvest.