- IGB Corporation announced on Bursa that it had signed a joint-venture agreement (JVA) with Aspire Horizon to set up a JVCo ' Wilmer Link Ltd ' with a 58:42 equity structure. The JVCo will serve as a platform for the shareholders to set up a special purpose vehicle (SPV) in Indonesia for a property development venture.
- We gather that JVCo is acquiring a parcel of land measuring 11,000sqm (2.72acres or 118,403sf) for US$30.8mil (RM97mil/RM819psf) in Jakarta Barat. We believe the land will be utilised for a mixed commercial/residential development, comprising apartments and a hotel.
- We are not imputing this deal into our model at this juncture due to the absence of details. However, it is a positive that the group has started being proactive in redeploying its capital with the expected gain from the listing of its two malls later this year. Despite the unfamiliar territory, IGB's risks are cushioned by the JV with the local partner. This could be the start of some exciting land deals to be made by IGB; recall that we had highlighted earlier that the group was eyeing other overseas developments, namely in London and Taipei.
- Just to recap, IGB will benefit handsomely from the listing of MidValley Megamall and Gardens Mall via an establishment of a REIT. The malls are valued at RM4.6bil or at a whopping RM1,815psf, and would result in a revaluation gain of RM1.3bil to KrisAssets or RM992mil (or RM0.67/share accretion) to IGB.
- There will be a special dividend and capital repayment amounting to RM1.27bil, which translates into an attractive RM2.88/share. Based on IGB's 75% stake, the company stands to get a handsome cash payment of RM951mil or RM0.64/share.
- There is a further revaluation surplus of RM1.05bil in IGB's under-appreciated portfolio of well-occupied office buildings (2.2 million sf), which are carried in its book at low historical costs. A hospitality REIT for its hotel assets would complete the re-pricing of its assets, transforming IGB into an asset-light fee-based entity with controlling stakes in three listed asset-specific REITs.
- We reaffirm our BUY rating on IGB with our fair value unchanged at RM3.50/share based on a 22% discount to its NAV of RM4.50/share.