KUALA LUMPUR (Feb 6): Eco World International Bhd (EWI) plans to reduce its share capital by a further RM500 million to pay a targeted 21 sen per share in dividends or RM504 million in total payout over the next two years.

In a Bursa Malaysia filing on Tuesday, EWI mentioned that the targeted distribution amount of RM504 million is only after setting aside funds for the group’s estimated working capital and funding requirements.

It is also subject to EWI meeting its sales targets and meeting the relevant regulatory requirements. The proposed capital reduction is also to provide additional headroom for further declaration of dividends in the future, in excess of the targeted distribution amount, it said.

The group intends to declare a first tranche of dividends amounting to at least RM144 million. This means shareholders of EWI can expect to be getting at least six sen per share in dividends in the first tranche.

EWI counts billionaire Tan Sri Quek Leng Chan as one of its largest shareholders with a 27% stake through GLL EWI (HK) Ltd, while founder Tan Sri Liew Kee Sin has a 10.27% direct stake in the group.

In announcing the deal, EWI president and chief executive officer Datuk Teow Leong Seng said that the strong appreciation of the British pound against the ringgit had enabled it to repatriate more sales proceeds in ringgit terms than anticipated.

“The gearing of our group is currently close to nil except for one term loan at our joint-venture company, EcoWorld London, for which our group has set aside sufficient funds for purposes of repaying such a loan following its maturity in March 2024,” he said.

Interestingly, Teow also noted that the group’s current working capital requirement is expected to be lower than those in the previous years, “in the absence of any immediate plans to undertake new launches or acquisitions in the near term”.

“After taking into consideration our reduced working capital and funding requirements, and given the limited development opportunities on the horizon, our group will continue to focus on monetising our completed stocks for cash generation,” said Teow.

This is not the first time that EWI embarked on a capital reduction to pay off its shareholders.

In August last year, the group undertook RM1.5 billion in share capital reduction, which eliminated its accumulated losses and facilitated a 33 sen interim dividend, as well as a six sen final dividend.

The total payout involved then was RM792 million for the interim dividend and RM144 million for the final dividend.

According to a bourse filing on Tuesday, EWI's RM500 million capital reduction will slash the group’s share capital to RM592.45 million from RM1.09 billion currently.

As the group had pro forma retained earnings of RM334.18 million as at end-October 2023 (less the RM144 million final dividend payout), the capital reduction will raise its retained earnings to RM843.01 million (less RM170,000 in estimated expenses), which the group intends to return to shareholders via dividend distributions.

EWI has set a targeted dividend distribution of 21 sen per share or RM504 million in total payout in 2024 to 2025, after setting aside funds for working capital and funding requirements.

Nonetheless, the group did note that its dividend distribution target of RM504 million is solely the group’s internal target, and is neither a financial estimate, forecast nor projection, and it had not been reviewed by an external auditor.

It is also subject to EWI obtaining shareholders' approval for the capital reduction in the upcoming 10th annual general meeting, achieving its internal sales target of RM850 million for the financial year ending Oct 31, 2024, and meeting the relevant legal and regulatory requirements.

The capital reduction is expected to be completed by the first half of 2024.

Entities linked to trio of largest shareholders entitled to RM320.29 mil of targeted dividends

Assuming shareholdings remain unchanged, the bulk of RM320.29 million or nearly 70% of the group’s dividend payout target is to go towards entities related to the group’s three largest shareholders.

Its largest shareholder Datuk Leong Kok Wah controls some 728.73 million shares or 30.36% stake via Eco World Capital (International) Sdn Bhd (EWCI) and Sinarmas Harta Sdn Bhd.

Leong’s directly owned two million shares or 0.08% stake entitles him an assumed RM420,000 of the total targeted dividend payout.

Meanwhile, EWCI's 628 million shares (27%) and Sinarmas’ 78.73 million shares (3.28%) in EWI entitle the pair to RM136.08 million and RM16.53 million of the payout respectively.

Meanwhile, Quek’s GLL EWI, a unit of Singapore-listed GuocoLand Ltd, which owns 648 million shares or a 27% stake in EWI, would be entitled to RM136.08 million of the targeted payout.

Meanwhile, Liew and his family’s 291.31 million shares or 12.14% stake would give rise to an entitlement of RM61.17 million.

With RM350.29 million of the targeted payout accounted for assuming the three parties’ share of the targeted dividend, the remaining RM153.71 million will go towards the remaining minority shareholders, who collectively own a 30.5% stake.

Shares in EWI ended unchanged at 31.5 sen on Tuesday, giving the group a market capitalisation of RM756 million.