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Saturday, February 16, 2008

Analysts mixed on UEM World restructuring

Most like the direct exposure to group's biggest asset

ANALYSTS were mixed in their opinions as to whether the proposed restructuring of UEM World Bhd would be good for all its shareholders.

Most liked the fact that the deal allows investors to have direct exposure to the group's biggest asset, the soon-to-be-listed UEM Land, master developer of the Iskandar Development Region in Johor.

UEM Land is 71.5 per cent owned by UEM World.

"It's changing from a conglomerate to a pure-play property development company. It's good for shareholders to have that focus," said an analyst from Hwang-DBS Vickers Research.

UEM Land is, after all, the prime beneficiary of Iskandar, he pointed out. As it stands now, investors have to buy UEM World to have exposure to UEM Land.

"If they believe in the prospects of UEM Land, which I think has very big potential, they should go for the deal," he added.

Some analysts, however, felt that the 15 per cent premium on the restricted offer for sale (ROS) to UEM World shareholders - which allows them to participate directly in the company's four listed subsidiaries - is nothing to be terribly excited about.

(It is a 15 per cent premium to the one-month volume weighted average market price of the companies' shares up to February 12.)

Jon Oh of JPMorgan, for one, said he was neutral on the deal as it was minimal value-enhancing.

The deal seems to be nothing more than just selling off the UEM World assets at close to market value and hiving off UEM Land, he felt.

"This just ring-fences the Iskandar investments away from the other businesses. They are still banking on the story of asset reflation and on Iskandar being a success," he said.

The premium on the ROS is "OK, but not spectacular", he added.

Meanwhile, analysts noted that there was a possibility of some of the listed subsidiaries, like Pharmaniaga Bhd, being taken private.

UEM Group owns 51.9 per cent of UEM World, which in turn owns 72.5 per cent of Pharmaniaga today.

UEM Group will thus have to make a mandatory takeover offer for the remaining shares in Pharmaniaga it does not own once the ROS becomes unconditional.

"They can privatise Pharmaniaga, or if they want to keep it listed, they may place out the shares," an analyst noted.

Analysts were told at a briefing by UEM World officials yesterday that the group wants to keep the four subsidiaries listed.

By New Straits Times (by Adeline Paul Raj)

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