AMID the weak market sentiment, newly-listed MCT Bhd has no plans to revise the terms or placement price of its call option granted to its substantial shareholder Philippine-listed Ayala Land Inc.
MCT executive director Datuk Lim Kok Boon (pic) tells StarBizWeek that the company is confident that its offering for Ayala, which was made before market troubles surfaced, still reflects the intrinsic long-term value of the company.
“At this point in time, we have no intention of going beyond that (the offer price). We do not think there is a need to do this as we take the view that the intrinsic value of the company is still there and remains unchanged,” Lim says.
The call option gives Ayala the choice to increase its stake in MCT at a minimum placement price of RM1.28 per share, or another formula that is calculated based on the 20 market days volume weighted average market price; whichever is the higher.
Should actual market price of MCT drop below RM1.28, analysts say it is likely that Ayala may not choose to exercise the call option.
“The market fluctuates and share prices are a result of various functions from market forces. But what is more important is the intrinsic value. For example, a house which is situated in a good location,” Lim says.
Major shareholders and founders of MCT chairman Tan Sri Barry Goh Ming Choon and Datuk Seri Tong Seech Wi entered into call option agreements with Ayala’s unit Regent Wise Investments Ltd in May.
The agreements give Ayala a right but not an obligation to increase its stake in MCT to up to 32.95% that should the deal be effected will see Goh and Tong selling some their stakes in the company.
Goh and Tong are unable to effect the deal as of yet because their shareholdings are also under a moratorium period that is six months after the listing date which expires on Oct 6.
Lim says that both Goh and Tong will still be the biggest combined shareholders in the company should the call option be exercised by Ayala with their combined stakes at 41.8%.
Currently, Ayala has a substantial stake in the company with 9.16% that was taken up pursuant to a private placement exercise that was undertaken in connection with MCT’s listing exercise.
Should the call option be effected, Ayala will be the single largest shareholder in the company but Lim notes that there will be no change to company direction should it happen.
Meanwhile, MCT is well positioned to take advantage of continually changing sentiment in the property market.
Lim says the company’s integrated structure means it can quickly switch its internal processes from being a low-cost home builder to a more premium one should the need arise.
“During good times we can gain higher margins from being integrated. There are no leakages to other parties. Our cost to market is lower than other developers. Our speed to market should we need to change is faster as well.
“In this way, the construction process also becomes faster and cheaper for us. Our idea is to use a Lego system, where the same building blocks can be used to make more than one object if you want to. In the same way in our design of a modular system we get the advantages of speed and efficiencies,” Lim adds.
In the near term MCT has RM3.2bil worth of gross development value in properties that are below RM700,000 per unit of which 43% are below RM500,000.
The company also has RM2.3bil in terms of unbilled sales, of which its customers had already secured the necessary financing arrangements for the home which will be realised progressively over the next few years.
MCT presently owns some 300 acres of undeveloped land with an estimated GDV of RM6.5bil in an area called Cyber South, that is in proximity to Cyberjaya.
The company also says that it is able to manage the implications of a weaker ringgit given that its integrated structure would enable it to increase efficiencies and save on cost.
“Internally, we can manage it better. Everything else being equal, we should be able to do that compared with other companies that are probably structured differently,” Lim says.
“We do everything in-house from the design team to the construction team. When it comes to the construction part, the main contractor (for other companies) may have building difficulties where costs can be a bit high.
“But we actually design as an integrated project as we also house the construction team,” he adds.
MCT, which went public under a reverse takeover of the then GW Plastics Holdings Bhd, does not have its financial statements yet on the public domain.
The company is slated to release its first set of quarterly results by the end of this month, Lim says, noting that he will reserve his comments for the company’s growth targets to a later time.