IGB Berhad announced that Verokey Sdn Bhd (VSB, an indirect wholly owned subsidiary) and Tower Ray Limited who each held a 50% stake in Black Pearl Ltd (BPL), have entered into a sale and purchase agreement with HNG Blackfriars 1 Ltd to dispose BPL for c.£208.75m (or c.RM1.2bn). To recap, BPL owns a freehold title to the land known as 18 Blackfriars Road, SE1, London which was purchased back in 2014 for about £122m. News to dispose of the said asset was first disclosed in 2019 (where it signed a non-binding heads of terms agreement with Hero Inc Ltd, Staycity Ltd and BSW Land and Property Ltd). The deal was subsequently aborted. We understand that the latest carrying amount of VSB’s investment in BPL was RM370.0m which included shareholder’s advance to BPL of RM376.5m. We are positive on the monetization exercise as fund raised can be redeployed for more yield and value accretive investments. We understand that the transaction will result in an increase in the Group’s net assets per share and earnings per share by ~RM0.21 each upon completion. Maintain our earnings for now pending deal completion. All told, we maintain our Outperform call with TP of RM2.70, pegged at c.65% discount to our RNAV estimates.

• Timely exit. Verokey and Tower Ray each hold a 50% stake in Black Pearl, which is the owner of a freehold title to a land known as 18 Blackfriars Road, SE1 in London — a property asset initially earmarked for a mixed-development. The land in London was initially purchased for about £122m in 2014. Project launch was deferred initially due to the change of design to meet authorities’ requirements. In 2018, it submitted planning application to the Greater London Authority to build six buildings ranging from 5 to 53-storeys each on the site that measures 0.80ha in total. This would have included an office space, a 548-room hotel, 288 residential units, a flexible retail component, a restaurant, a music venue, and car parks, among others, which was again delayed by the uncertainties of Brexit and then the Covid-19 pandemic.
  Subsequently, the JV signed a non-binding heads of terms agreement with Hero Inc Ltd, Staycity Ltd and BSW Land and Property Ltd, who wanted to buy their entire stakes in Black Pearl for £235m but the deal subsequently lapsed. Albeit the latest deal is c.11% lower, we believe it is fair given current market conditions.

Source: PublicInvest Research - 22 Oct 2021