by NUR HANANI AZMAN
IJM Corp Bhd has agreed to divest its entire stake in IJM Plantations Bhd representing 56.2% of shares in IJM Plantations, to Kuala Lumpur Kepong Bhd (KLK), for a cash consideration of RM1.53 billion.
IJM Corp will continue to be entitled to the dividend of 10 sen per share in July that was declared by IJM Plantations. Upon completion of the disposal, IJM Plantations will cease to be a subsidiary of IJM Corp.
The group believes that the proposed disposal is in the best interest of the group, given the attractive offer price and the maturity of the plantation business, which it currently has no plans to expand further.
IJM Corp CEO and MD Liew Hau Seng said the proposed disposal will result in a gain on disposal of RM700 million.
“The recent strong crude palm oil (CPO) price environment and good showing by plantation companies have presented an opportune window for IJM Corp to dispose of its plantation business at an acceptable price.
“The proposed disposal allows IJM to realise its value in IJM Plantations that has been underappreciated by the market, partly due to the illiquidity of the stock,” he said in a statement.
With the top 30 shareholders of IJM Plantations owning over 91% of the company, the stock is tightly held.
Monetising its stake in IJM Plantations would be an effective way for IJM Corp to realise the value of IJM Plantations, and in doing so, benefit all existing shareholders of the latter.
At the offer price of RM3.10, the market capitalisation of IJM Plantations is RM2.73 billion.
The proposed disposal will also enable IJM Corp to streamline its businesses to focus on construction, property development, infrastructure concessions and the manufacturing of building materials, all of which derive synergistic benefits with one another, thereby reducing the conglomerate discount currently ascribed to its market valuation.
Liew said the net proceeds from the proposed disposal would strengthen IJM Corp’s balance sheet and see its net gearing decrease from 44.0% to 21.6%.
“This would enable the group to pursue new opportunities that may arise, fund existing working capital or capital expenditure requirements and reward shareholders by way of a special dividend or pursue share buyback activities.
“IJM Corp has, in the past, declared special dividends when it successfully monetised its assets,” he added.
Going forward, Liew said IJM Corp is on firm footing as we pursue our next growth trajectory.
“We have been working hard to grow shareholder value, which includes adopting a more proactive stance on capital management.
“The significant gain from the proposed disposal of IJM Plantations is expected to reduce the steep discount to IJM Corp’s share price and highlights sizable value unlocking potential, given our attractive portfolio of assets,” he said.
Notably, the value realised from the proposed disposal of RM1.53 billion equates to 21% of IJM’s market capitalisation of RM7.14 billion.
IJM Corp’s share price was two sen or 1.03% lower at RM1.93, with a market value of RM7.03 billion.