Rev Asia is proposing to dispose of its 52.5m iCar shares. The expected gain  from  disposal  is  MYR210.2m  (subject  to  changes).  It  intends  to distribute  90%  of  the  gain  to  shareholders.  After  the  disposal  of  the equity  stake,  Rev  Asia’s  bottomline  may  turn  positive  as  it  no  longer shares iCar’s losses on its income statement. Maintain BUY, with higher cum-dividend FV of MYR1.68 (from MYR1.10).

Unlocking the value.  We have been highlighting to investors that Rev Asia’s  value  does  not  lie  only  with  its  operational  growth  potential  but also  in its 27.2% investment in  iCar  Asia (iCar)  (ICQ AU, NR)’s  shares. With  the  proposed  disposal,  the  theoretical  net  gain  (see  Figure  2)  is MYR210.2m,  or  MYR1.56/share.  90%  of  the  expected  gain  will  be distributed  as  dividends  to  shareholders  within  three  months  after  the completion  date,  while  10%  would  be  retained  as  working  capital.  Do note  that  Rev  Asia  would  still  need  to  call  for  an  EGM  to  get shareholders’  approval.  It  can  either  sell  the  shares  in  tranches  or dispose  of  them  in  one  lump  sum  via  open  market  or  off-market transactions, with the final price to be determined later.

iCar’s  share  performance.  iCar’s  share  price  has  performed tremendously well since  its  IPO. It was listed at  AUD0.20 in Sept 2012. As  at  22  Aug  2013,  its  closing  price  was  AUD0.61  while  the  5-day volume  weighted  average  market  price  of  its  shares  –  up  to  and including the  latest practicable date (LPD)  –  was AUD1.54. iCar’s share price  has increased approximately  2.52 times and 7.70 times  during the past one year and since its listing date respectively. 

Managing the risk. The completion of the proposed disposal may result in  Rev  Asia  becoming  a  cash  company  under  Bursa  Malaysia’s  listing requirements, ie  consolidated assets consisting  of 70% or more in cash or  short-term  securities.  Nonetheless,  it  is  able  to  rectify  its  financial position with the intention of  distributing  90% of the cash proceeds to its shareholders.

Maintain  BUY.  We  make  no  changes  to  earnings  forecasts  pending 
approval for the disposal at the  EGM. The disposal may see Rev Asia reporting  earnings  after  the  disposal  of  loss-making  iCar.  We  maintain our  BUY  call  with  a  higher  cum-dividend  FV  of  MYR1.68  (from MYR1.10).  This  is  based  on  our  SOP  calculation  and  the  net  gain  on disposal as highlighted in the announcement.

Source: RHB