IN the recent rally among education stocks, there was one clear winner and one big loser among the publicly listed companies. Selangor Properties Bhd, the major shareholder of HELP International Corp Bhd, was a clear winner, as the value of its 51% stake in HELP appreciated. EcoFirst Consolidated Bhd was the big loser, having divested its stake in SEG International Bhd just before the stock started its big rally, and rose over four times from its selling price
SelProp, the big winner in HELP
Selangor Properties Bhd (Selprop) is arguably the biggest winner in the education stock rally, as it is the largest shareholder in HELP International Corporation Bhd.
According to HELP's director of corporate planning Adam Chan Eu-Khin, Selprop had been supportive of HELP from the beginning.
"It has stuck by us through thick and thin since the beginning. That is why we are proposing a bonus issue for the first time since IPO as a reward," he told The Edge Financial Daily.
HELP had recently proposed a three-for-five bonus issue of 53.26 million shares, upon the completion of which its share base would increase from 88.8 million to 142 million shares.
Selprop, one of Malaysia's oldest and most conservative listed property companies, has a 51% stake, or 45.27 million shares in HELP.
Selprop is the largest landowner in the prime Damansara Heights suburb of Kuala Lumpur, where it owns 33 acres (13.2ha) as well as several commercial buildings, including Menara Milenium, Wisma Damansara, Kompleks Pejabat Damansara and 16 shops along Jalan Batai.
It also has a 50% stake in Claremont Shopping Centre project in Perth, and sizeable cash reserves.
Interestingly, Selprop's stake in HELP is carried at very low costs as Selprop invested in the company during the early stages.
According to Selprop's annual report for the financial year ended Oct 31, 2009, the cost of its investments in subsidiaries quoted and which refers to its stake in HELP, stood at only RM2.62 million. That is equivalent to a book cost of just 5.8 sen per HELP share.
The market value of these shares then, according to the annual report, was RM70.63 million, which is equivalent to RM1.56 per share. Based on HELP's closing price of RM3.80 last Friday, Selprop's stake would now be valued at RM172 million.
Compared with its book cost of just RM2.62 million, Selprop is sitting on unrealised gain of RM169.4 million, which is equivalent to 49 sen per Selprop share. The property company has 343.617 million shares issued. Selprop's net assets per share stood at RM4.95 as at April 30, 2010.
Adding the "unrealised gain" of 49 sen per share will imply a revised net asset value of RM5.43, some 43% above the last traded share price of RM3.80. And this does not yet include the revaluation of its own property assets.
While analysts note Selprop's shares are undervalued, the stock has been trading below its NTA due to the company's conservative stance compared to other developers.
The company derives most of its income from the rental of its properties, although the upcoming launch of the Jalan Batai condominiums in Damansara Heights will lift future earnings.
Ecofirst, a case of bad timing?
Ecofirst Consolidated Bhd (ECB) turned out to be the biggest loser in the education stock rally when it disposed its entire 19.87% stake in SEG International Bhd (SEGi) from March to April 2010, just before the counter surged in the following months.
Ecofirst, formerly known as Kumpulan Emas Bhd, pocketed about RM30.6 million, but could have gained at least four times more if it had held on to SEGi's shares when it rallied.
Ecofirst had sold its stake, representing 17.69 million SEGi shares, of which 1.7 million shares were held by its wholly owned subsidiary Sawitani Sdn Bhd (SSB). It was sold to Rexter Capital Sdn Bhd for RM30.6 million or RM1.73 per share.
The original cost of investment of Ecofirst and SSB in SEGi was RM36.1 million, made since 2001. In its Bursa filing, Ecofirst said the proceeds would be used to repay its RM7 million borrowings and for working capital purposes.
In April, just after Ecofirst sold its shares, SEGi announced a one-into-two share split, and a one-for-two five-year warrant issue at five sen per warrant, with an exercise price of RM1.
A month later in May, SEGi added an additional two-for-five bonus issue to the proposals, which took effect after the stock split. The share split and bonus issue was completed on July 15. Prior to the share split, SEGi had surged to a 52-week high of RM4.75 on June 24.
If Ecofirst had held on to the SEGi shares, its original stake of 17.69 million shares today would become about 49.53 million shares, after the stock split and bonus issues, according to calculations by The Edge Financial Daily. In addition, it will be entitled to subscribe for 24.77 million warrants.
Given SEGi's closing price of RM2.22 last Friday, Ecofirst's stake would have been worth RM109.96 million. In addition, the warrants would be worth RM27 million, based on the last traded entitlement rights price of RM1.09, before they ceased trading.
This suggests Ecofirst's stake, which was sold for RM30.6 million in March-April, would have been worth RM136.96 million — or 4.5 times more, just five months later.
SEGi had also declared a final dividend of 3.5 sen per share less tax for the year ended Dec 31, 2009 that was paid on July 28, 2010.
Ecofirst now only holds a small 2.24% stake in SEGi. However, financial woes continue to besiege Ecofirst after the disposal.
For the financial year ended May 31, 2010, it posted a net loss of RM41.38 million, or 6.36 sen per share, on the back of RM21 million revenue, due to an impairment loss of RM26 million on the uncompleted development in Seri Kembangan, Selangor.
Its borrowings stood at RM130.5 million, while its cash and cash equivalents stood at RM26.17 million. Its net debt of RM104.33 million translated into net gearing of 99%.
Had it held on to the SEGi shares a little longer, EcoFirst ironically would have been able to pare down all its debts. While Ecofirst's sale of its stake in SEGi appears to have a case of bad timing, it was not the case for Rexter Capital, which acquired its shares.
It is unclear who is behind the privately held company. Rexter first emerged as a substantial shareholder of SEGi on March 12, 2010, when it acquired an initial 8.29% stake. Its stake as at mid-July stood at 25.4%.
Written by The Edge Financial Daily
No comments:
Post a Comment