Technical | Fundamental Analysis Discussion Stocks Listed In Bursa

Monday, September 8, 2014

Ireka ... Entitle To RM200 million Divestment Procees !!!

Its net assets per share stood at rm1.09 as at June 30 2014.

Its first feather in its cap is the 23.07% stake it holds in London listed Aseana Properties Ltd, which has a portfolio of properties worth more than USD200 million.

Also Ireka has managed to replenish its order book with contracts worth rm1.2 billion which can last it for at least two years from Sept 2014.

The rm1.2 billion order book is expected to give Ireka an average annual turnover of rm500 million from its construction division over the next two to three years from Sept 2014.

The ASPL is structured like a development fund with a shelf life seven years which will come to an end in the middle of 2015. Any extension of this period will be subject to the decision of a continuation vote at the company’s 2015 AGM.

ASPL will no longer invest in any new property development projects .. and it had stopped doing it. All the projects in the portfolio will be realized over time and the money will be returned to the shareholders.

The divestment of all of ASPL’s assets from 2015 is already being planned. ASPL has an estimated realizable net asset value of USD270.82 or USD1.27 per share compared with its current market price of USD0.44 per share.

Ireka will be entitled to 23.07% or about rm200 million of the divestment proceeds – which is almost double the company’s market cap of rm113 million.

About 74% of ASPL’s funds are invested in property development projects in Malaysia. It has four operating assets namely Aloft KL Sentral Hotel, 1 Mont Kiara, Harbour Mall Sandakan and Four Points by Sheraton Sandakan Hotel.

The losses in some of ASPL’s operating assets have dragged down Ireka’s earnings in the past.

With an order book of rm1.2 billion in hand, Ireka will be profitable going forward.

The major jobs in the order book are high rise residential developments for SP Setia’s KL Ecocity in KL, UEM Sunrise Bhd’s Imperia Puteri harbor in Johor, OSK Property Holdings Bhd’s Solstice in Cyberjaya as well as MRT package.

An increase in the size of the order book is generally positive for a construction company’s stock valuation. If Ireka can convert what is in its order book to its bottom line, the company’s stock may be able to garner the valuation that its peers have.

Ireka is mainly involved in the construction of high end and high quality buildings higher than 40 storeys and a limited amount of civil engineering works for infra construction.

With ASPL preparing to exit the market, Ireka has stepped up its property development efforts since 2012. It has also increased its land bank and has 65 acres in the Klang Valley and Nilai.

The gross development of its land bank is rm2 billion over the next five to six years from Sept 2014.

On that note, the volatility in Ireka’s financial results and its lackluster share performance could soon be history as the rest of FY2015 unfolds. The building blocks are in place and Ireka’s finer years are ahead from Sept 2014.

The Lai family collectively holds a 56.54% stake in Ireka.

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