Analysts positive on IWH, sees ‘superb future earnings potential’

KUCHING: The proposed merging of Iskandar Waterfront Holdings Sdn Bhd (IWH) and Iskandar Waterfront City Bhd (IWC), of which IWH will resume the listing status of IWC (post exercise), met with positive views from analysts.

They pointed out that this move could create a new breed of developers in town, which focuses on land sales.

In a report, the research arm of Kenanga Investment Bank Bhd foresaw that IWH may have great earnings potential given that they have identified buyers for circa 150 acres of Bandar Malaysia.

“Assuming an average selling price of RM2,000 per square feet (psf), the potential land sale of circa 150 acres of land would contribute c.RM2.5 billion to its bottom-line or RM0.8 billion per annum over three years, allowing IWH to convert its redeemable convertible preference shares ( RCPS) as it would have then achieved a cumulative profit after tax of RM1 billion.”

To recap, IWC has entered into a land sale agreement with Greenland, China back in 2015 for the disposal of three parcels of land in Johor ( 127.9 acres) for total consideration of RM2.4 billion which could potentially generate profit after tax (PAT) of RM1.2 billion which is to be recognised over three years.

“However, this particular deal has yet to be completed as they have received further extension till May 5, 2017,” the research team added.

“Assuming that every party agrees to inject their land into IWH, IWH would effectively own 7,367 acres of prime land in Johor as most of these lands are located within prime areas, which are Danga Bay, Plentong, and Johor central business district (CBD).

“Citing its press release, its Johor lands have a total open market value ( OMV) of circa RM30 billion that is assessed by independent valuers for its 7,367 acres of prime land-bank in Johor, which implies an average market price of RM93.5psf,” it estimated.

As for its Bandar Malaysia land (486 acres) with an effective stake of 36 per cent, Kenanga Research noted that it would only be injected into IWH after the land gazette is lifted.

“Based on an illustrative selling price of RM2,000 psf, Bandar Malaysia alone would carry a total market value of RM42. billion and at 36 per cent stake, this will add another RM15.2 billion to its Johor land market value of RM30 billion.

“This implies a combined market value of RM45.2 billion for its land, which management intends to monetise through land sales in the future.”