Friday, August 22, 2014

Brem ... Cheaper Entry For Property Development In Segambut.

A property and construction player expects strong demand for its properties especially in prime locations like Segambut Dalam in KL to boost its financial performance in the new fiscal year ending March 31 2015.
Property development will underpin its growth for 2014 to 2015.

Brem has a total of 13.56ha of freehold land in Segambut Dalam as of March 31 2013 for the development of Bukit Prima Pelangi, which could generate a GDV of rm2.56 billion. This development is expected to sustain its operations for six to eight years from 2014.

It had also bought a parcel of land in Segambut to replenish its landbank. The latest purchase raises its land reserves in the area to almost 15ha.

In total, it has 30.1ha in KL and PJ, including in Ulu Klang. These land are under the purview of its 75% owned subsidiary.

The property segment made up almost 60% of the group’s revenue in FY2014.

Brem will focus on condominium and apartment development after having complted its terrace components for its Bukit Prima Pelangi development.

Brem is also involved in construction, water concessions as well as property investment and holding activities. All divisions are profitable.

Its construction division has an order book of rm260 million as of March 31 2013. As for property investment, it owns and operates Kepong Brem Mall.

Brem participated in a water concession business in Papua New Guinea some 17 years ago prior to 2014. It has a 22 year agreement with PNG’s government to supply water to the Pacific island nation. The concession will expire in June 2019.

Its net asset value per share stood at rm2.79. It was earlier reported its real net asset could be worth about three times its NAV.

Brem acquired most of the Segambut Dalam land at an average price of rm65 psf from 1995 to 2005. This is substantially lower than the purchase price of rm185 psf Brem paid for its latest transaction in July 2014.

The company will be a cheaper entry to property development than other property players like Keladi which had land near Bukit Prima Pelangi.

Aside from the prime land in KL and PJ, it owns 182.02ha of development land in the Klang Valley including Bukit Raja and in Kedah. They are earmarked for long term development. These parcels were purchased at low prices … like the 1.88ha in Mukim Bukit Raja which has low book value of rm3000 as of March 31 2013.

Brem does not adopt a policy of regular revaluation for its landed properties.

It had disposed of its 32.89% stake in Bertam Alliance Bhd in July 2014 for rm80.24 million. It will channel the sale proceeds into other, more attractive and higher yield investments when opportunity arise.

Friday, August 15, 2014

IPO - Reach Energy ('Well-Known' Cornerstone Investors)

Lembaga Tabung Haji (LTH), Koperasi Permodalan Felda Malaysia Bhd and Pelaburan Mara Bhd have taken stakes In Reach Energy Bhd.

Prior to this, GLICs do not have the mandate to invest in Spacs. Spacs are shell companies with no operations or income-generating business at its point of listing.

Spacs undertake the listing for the purpose of raising funds to acquire businesses or assets, otherwise known as the qualifying acquisition (QA).

It appears that LTH, Felda and Mara obtained the mandate to invest in Reach, an oil and gas Spac, after the new guidelines were released earlier 2014, as they took comfort mainly in the investor protection clause.

Malaysian oil and gas services firm Daya Material Bhd is only an initial investor in Reach Energy. Daya’s ownership will be only 1.74% after the IPO.

Some of the other cornerstone investors include tycoon Tan Sri Chua Mah Yu’s son Chua Sai Men, Lembaga Tabung Haji, fund managers CIMB-Principal Asset Management Bhd and Hong Leong Asset Management Bhd, MKW Jaya Sdn Bhd, MTD Capital Bhd and Paul Poh, a close associate of Hong Leong Group chairman Tan Sri Quek Leng Chan.

The investors, who are not subject to a lock-up period, will take up a combined 210 million shares and warrants, or 16.45% of Reach’s enlarged share base.

Poh is a lieutenant of banking tycoon Tan Sri Quek Leng Chan. Quek and Poh have been heavily investing in oil and gas companies. Meanwhile, Sai Men is the son of tycoon and savvy investor Tan Sri Chua Ma Yu.

MTD Capital is a listed bumiputra investment holding company with interests in infrastructure development.

As for state-owned Pelaburan Mara, it came into the limelight in April 2014 when it bought a 27% stake in shipping firm PDZ Holdings Bhd for RM41mil.

The cornerstones make up some 20% of Reach Energy’s share base while institutions make up some 15%. The remainder shareholders are made up of corporate and individuals.

Other asset managers that have taken up stakes in Reach Energy include Kenanga Investors, Norway’s sovereign fund Norges, Areca Asset Management and Allianz Investment.

What attracted the bumi funds was the investor protection. Reach was putting in 94.75% of its funds into the trust fund, instead of the stipulated 90%. Should a QA not be executed in 3 years time, the 75 sen per share put in by the investors actually becomes 76 sen, based on the existing interest rate.

The fact that Reach was a syariah-compliant company, also helps the investing case.  Certainly, Reach is the first Spac to be listed under the Securities Commission’s new strict guidelines, with many people touting it to be the safest Spac.

The management of Reach, led by Shahul Hamid Mohd Ismail has put in a significantly higher amount of money than the three previous Spacs – Hibiscus Petroleum Bhd, Cliq Energy Bhd and Sona Petroleum Bhd.

Under the new guidelines, it is stipulated that the management team’s shares should be issued at no less than 10% of the IPO price. The subscription price per share for the management of Hibiscus, Cliq and Sona was 1 sen, while Reach had to put in 7.5 sen based on the IPO price of 75 sen.

The management of Reach ended up putting in a total of RM20mil for its management shares. The management of the other Spacs put in between RM1mil and RM3mil, while is significantly lesser. With the kind of money the management of Reach was putting in, there is certainly a greater urgency to make the business work.

Furthermore, Shahul and team will not be able to cash out their shares even after they make their QA. Another new guideline of the SC is that Reach Energy’s moratorium on the shares held by management will be in place up to one full year of audited operating revenue. Following that, the management will be allowed to dispose its shares up to a maximum of 50% per annum on a straight line basis.

Reach’s IPO comprises 1 billion shares at an issue price of 75 sen each. The offer comes with 1 billion free detachable warrants on the basis of one warrant for one share subscribed.

SPACs are shell companies with no operations or income-generating business at the point of listing.

SPACs undertake an IPO to raise funds to acquire businesses or assets, otherwise known as QA.

Reach Energy aims to clinch a brownfield asset in the Asia-Pacific region with the ability to generate early revenue within two years of acquisition.

Reach Energy can raise a further RM958mil when the warrants are exercised in full. The free warrants are issued on a one-for-one basis per Reach Energy share.

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