EKSONS (9016) - DISPOSAL OF LAND: A Mini Review

After doing some reviews about proposed of disposal by FACBIND (2984) and LBS (5789), recent disposal of land by Eksons (9016) attracts my eye balls. Nonetheless, my homework indicates that this case appears less attractive compared to my previous case studies, as that stated as follows.

 

100% Vs 60%

First, it is worthy to highlight that we should only consider 60% of the total potential profits from the deal taken by Eksons (9016). This is because this proposed disposal is going to be taken by its 60% owned subsidiary.

 

In other words,  Eksons is going to have 60%*140m = RM84m or EPS = RM84/164 = RM0.51 per share only, if the disposal is successfully completed.

  

"DISPOSAL OF LAND BY RUSSELLA TEGUH SDN BHD A 60% OWNED SUBSUBSIDIARY OF EKSONS CORPORATION BERHAD FOR A TOTAL CASHCONSIDERATION OF RINGGIT MALAYSIA ONE HUNDRED FORTY MILLIONTWO HUNDRED SEVENTY THREE THOUSAND THREE HUNDRED ANDEIGHTEEN ONLY (RM140,273,318-00)"

“RTSB is a wholly-owned subsidiary of The Atmosphere Sdn Bhd which in turn is a wholly-owned subsidiary of Vibrant Hub Sdn Bhd. Vibrant Hub Sdn Bhd is 60% owned by Eksons.”

 

"Earnings per share

The Eksons Group expects to record a net gain after minority interests on disposal of approximately RM52.3 million from the Disposal for the financial year ending 31 March 2015. This is equivalent to approximately 32 sen per share"

Well, with one-off profit of 32sen and my estimation of RM0.51 selling price, the cost of this investment is around 19sen. Hmmm... the appreciation is less than 100%. I speculate the land was bought in 3~4 years ago.

 

Special Dividend?

Unlike previous case studies, in the document, Eksons (9016) already has announced that they are going to use the money to buy ANOTHER new lands! Thus, I hardly believe that there will be any special dividend even the proposed disposal is completed.

 

"UTILISATION OF PROCEEDS

The proceeds of the Disposal will be used to finance on-going projects and purchase of new lands for development. "

 

Another Potential Risk

Maybe this transaction will be cancelled.

 

Something Amuses Me

When I read the rationale for the disposal, I was surprised. This is because: one one hand, Eksons (9016) is going to use the profits to acquire new lands for future development; one the other hand,  Eksons (9016) highlights that the only one reason for them to dispose this land is because the value of the land is appreciated. How do you think about the argument?

 

Of course, maybe the land is really over-valued. Then, this may be a good deal. Or else... 

 

" RATIONALE FOR THE DISPOSAL

The Land was part of the land bank of the Group’s property development division and was intended to be developed with a mix of commercial and retail components. However in view of the appreciation of value of the Land, the Group has decided to dispose the Land.

The proceeds of the Disposal will enable the Group to acquire new lands for development."

 

To sum up, comparing to my previous case studies, apparently, EKSONS (9016) is less attractive to me.  Nonetheless, it may attract you due to your very personal reasons. I do welcome you to share it with me. Who knows, it may change my mind. That's all for today and happy invest. More fascinating articles and sharing will be updated weekly in Xaivier Blog. So, you are welcome to subscribe our feed to receive our weekly updates

Written by: Xaivier Chia

P/S: The above sharing is solely based on personal insight and information that believed to be reliable. Your valuable feedback are very welcome.

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