Monday, January 3, 2011

IJM Land falls, MRCB up after merger off

IJM Land Bhd fell to a six-week low in Kuala Lumpur trading after scrapping plans for a RM6.4 billion (US$2.1 billion) merger with MRCB to form the Southeast Asian nation’s second-biggest property developer.

The stock dropped 3.2 per cent to RM2.77 at 11:01 a.m. local time, set for its lowest close since Nov 16. Malaysian Resources rose 0.5 per cent to RM2.00, after initially losing 1 per cent in opening trade.

“The aborted merger is a major disappointment,” Wong Chew Hann, an analyst at Maybank Investment Bank Bhd, said in a report today.

“Expectations have been built in for a much stronger outlook under an enlarged group.”

This was one of three separate tie-ups proposed in November by Malaysian developers, keen to take advantage of improving economic conditions to grow in hopes of winning bigger projects.

IJM Land and MRCB said on Dec 30 they aborted their merger after failing to agree on terms.

IJM Land’s fair value was cut to RM3.50 from RM3.65 at RHB Research Institute Sdn Bhd, according to a report today. RHB maintained its “outperform” rating on the stock. Malaysian Resources’s share price estimate was reduced to RM2.05 from RM2.30 at OSK Research Sdn Bhd, which said in a separate report it kept its “neutral” rating on the stock.

Bulking Up

The two companies first announced plans for a share swap on Nov. 23. A union would have created a group with 9,000 acres of land bank and assets worth more than RM3 billion, Rafidz Rasiddi, head of investment banking at RHB Investment Bank Bhd, one of the advisers on the deal, said at the time.

A merged group would have boosted share trading liquidity and improved the chances of winning key government land development projects, including one at Sungai Buloh outside Kuala Lumpur, said Maybank’s Wong.

The government plans to develop Malaysian Rubber Board land in Sungai Buloh at an estimated cost of RM10 billion, Prime Minister Najib Razak said on June 10. The land covers an area of 3,300 acres, he said.

IJM Land is primarily involved in township developments, while Malaysian Resources is known for its high-rise office projects.

Malaysian Resources is controlled by the Employees Provident Fund, the country’s biggest pension fund, while IJM Land is a unit of IJM Corp, a construction and plantations group.

UEM Land Holdings Bhd, the biggest publicly traded developer in Malaysia, made a RM1.4 billion takeover offer for smaller rival Sunrise Bhd on Nov 4. Malaysian businessman Jeffrey Cheah said on Nov 24 that he plans to merge Sunway Holdings Bhd and Sunway City Bhd, two property and construction companies he controls, in a transaction valued at US$2 billion.

Malaysian Resources gained 1 per cent to RM2.01, after initially shedding 1 per cent in opening trade. -- Bloomberg

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