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Tuesday, November 23, 2010

IJM Land and MRCB shares suspended, they are to announce potential corporate exercise today

An artist’s impression of IJM Land’s RM4.3bil The Light Waterfront phase two project.

PETALING JAYA: Market talk of a potential merger, or takeover, involving IJM Land Bhd and Malaysian Resources Corp Bhd (MRCB) has intensified with the suspension of the shares of IJM Land, its parent IJM Corp Bhd and MRCB since 9am yesterday pending a material announcement on a potential corporate exercise.

The companies are expected to announce details of the corporate exercise later today.

An analyst with a local research house said there was room for consolidation in the local property sector to make way for more competitive and bigger entities in the likes of their better capitalised counterparts in Singapore.

There are various possibilities how the exercise will be carried out. One involves the merger of IJM Land and MRCB into a new entity and the other is via the takeover route, he told StarBiz yesterday.

He said the rationale for a merger or takeover was for both parties to leverage on each other's strengths and synergies going forward.

With the Employees Provident Fund (EPF) having close to a 42% stake in MRCB, he said there was value in MRCB due to its expected involvement or major role in the redevelopment of the Government's land in Sungai Buloh, and a possible strong uplift to the construction order book from the rollout of the 10th Malaysia Plan projects.

Another analyst said while MRCB had proven itself in commercial development, especially the award-winning KL Sentral development, its track record in residential development has not been significant.

IJM Land, with its good track record in residential projects and township development, will be a good match for MRCB as its expertise will be most valuable to the enlarged group's expanded landbank, he said.

Strong brand

The property development arm of IJM Corp has the advantage of a strong brand and is a trusted developer of quality niche properties and new townships.

It is well regarded for its township building expertise as well as expertise in building medium to high-end residences and commercial projects.

Among its flagship projects are The Light Waterfront project in Penang as well as the Seremban 2 and Shah Alam 2 townships.

The analyst said MRCB's advantage of being one of the frontrunners for the redevelopment of the Sungei Buloh land could be the main impetus for the coming together of both companies.

We believe MRCB has been helping the EPF in drawing up the masterplan for the 3,300 acres in Sungei Buloh. However, details on the plot ratio, size of initial development, and other issues are not available as yet. But we understand that the Government is expected to announce the award and details by the first quarter of 2011, he added.

The Government and the EPF will form a joint venture to promote the development of the Sungei Buloh land into a new hub for the Klang Valley. The land is believed to have a gross development value (GDV) of RM10bil.

KL Sentral's development is also progressing well with over RM4bil of GDV having been completed. MRCB, together with its partners, are undertaking RM4.3bil worth of development, to be completed mostly in 2012.

Most of the development centres on Lot G, comprising two office towers, one retail mall and a hotel, with a gross floor area of about three million sq ft. The retail mall, to be called Nu Sentral Mall, will be kept for rental income. Two more properties KL Sentral Park and 348 Sentral (office and apartments) would also be injected into its property investment units for rental income. We understand that about 53% of tenants have been secured for KL Sentral Park and Shell would be taking up office space at 348 Sentral, the analyst said.

He said there would be about RM6bil worth of GDV remaining for development in KL Sentral with construction to start mostly in 2011 and 2012.

This development would include office suites (Lot B), office towers, St Regis Hotel/Residences, and a luxury high-rise development (joint venture with CapitaLand and Quill).

The analyst said MRCB was targeting at least RM1bil of new jobs next year. Among others, it is eyeing some portion of the civil works for the RM43bil MRT project proposed by MMC Corp Bhd and Gamuda Bhd.

The group is also expecting renewals to environmental projects, including the Sungai Pahang rehabilitation project, which is valued at about RM200mil. It is also looking at RM300mil to RM400mil worth of new transmission jobs from Sabah and Sarawak, he said.

By The Star

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