Wednesday, November 24, 2010

RHB Research: Prospects for IJM Land-MRCB merger good

KUALA LUMPUR: RHB Research Institute said the proposed merger between IJM Land and MRCB offered good prospects.

Under the merger plan, a new company will be formed (Newco) to facilitate the proposal, and IJM Land and MRCB shares will be exchanged for shares in Newco, or a combination of Newco shares and cash.

The exchange will be determined based on RM3.65 per IJM Land share and RM2.30 per MRCB share. The exchange will also apply to convertible securities ' RCULS, and a scheme will be included for IJM Land warrants (which should reflect the value of mother shares).

RHB Research said on Wednesday, Nov 24 at the offer price of RM3.65, which is just 4.3% above its previous fair value of RM3.50, it implied a CY11 PE of 20.6x and PB of 2.43x (based on current outstanding shares and BV as at 2QFY11), which are fairly attractive in its opinion.

Post-merger exercise, the Newco will have a market cap of RM7 billion to RM8 billion and landbank of 9,000 acres.

'Prospects for Newco are good, as it will have the access to IJM Land's existing strategic landbank in Klang Valley - 2,000-acre Canal City land (in the southern side), and have a chance to participate in the 3,300-acre Rubber Research Institute land (in the northern side).

'We believe the Newco, as a big cap property stock, is likely to trade at a premium (to RNAV), due to its size, landbank location, and liquidity, possibly on par with SP Setia and UEM Land-Sunrise,' it said.

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