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Saturday, February 16, 2008

Revamp plan to drive UEM World

Analysts say it will make group more focused and raise unit UEM Land profile

UEM World Bhd's proposed restructuring to better position the group for further growth has received positive response from analysts.

“The exercise will make UEM World more focused and raise the profile and financial capability of UEM Land Sdn Bhd,” an analyst said, adding that the exercise would create a strong and full-fledged property development company.

UEM World managing director Datuk Ahmad Pardas Senin told a briefing yesterday the exercise would provide a platform for further growth in the company's business.

“It is designed to give shareholders of UEM World direct participation in UEM Land, which in recent periods has increasingly become the driver for the share price of UEM World,” he said.

Datuk Ahmad Pardas Senin at the media briefing.

UEM World has seen its share price more than double from RM1.78 in the beginning of 2007 to RM4.12 before its suspension from trading on Tuesday.

An analyst at a local brokerage said the proposed consolidation of UEM World would make UEM Land a group more focused on the property business.

“It will be able to leverage on and take advantage of its huge land ownership in the Iskandar Development Region (IDR),” he said, adding that local and foreign investors had bought into UEM World for the company's long-term viability.

Under the proposed restructuring, existing shareholders of UEM World will receive what they effectively own in UEM World. They would also have to pay a 15% premium on the market value of the listed subsidiaries, should they choose to subscribe for the non-renounceable restricted offer for sale (ROS).

Assuming that a shareholder who owns 100 UEM World shares accepts the ROS, he would have to pay RM120.26 for a basket of 35 UEM Builders Bhd shares, 21 Opus International Group Bhd shares, and five shares each in Pharmaniaga Bhd and Cement Industries of Malaysia Bhd. On top of that, the shareholder would also receive RM124.82 cash.

If the same shareholder does not accept the ROS, he will receive 125 shares in UEM Land and RM124.82 in cash.

Analysts said both options would benefit shareholders, as they would be offered a capital repayment of RM124.82 per 100 UEM World shares.

“The exercise will not put shareholders at a disadvantage. Apart from the capital repayment, they would also receive dividend in specie as well as capital gains from the disposal,” an analyst said.

“The exercise will eventually turn the company into a pure property play. The current property market is very lucrative,” he added.

Analysts say Bandar Nusajaya, a key component of IDR and UEM World's flagship project, would enjoy higher value as the company launches more properties there in the coming years.

UEM World, which posted a year-on-year net profit growth of 200% for the third quarter ended Sept 31 to RM37.59mil, has a construction order book that continues to excite investors. Analysts said the company would continue to do well, largely due to its development in the IDR.

By The Star (News Analysis by Leong Hung Yee)

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