This article first appeared in The Edge Malaysia Weekly on March 29, 2021 - April 4, 2021

PLANS by Iskandar Waterfront Holdings Sdn Bhd (IWH) to float its shares on the local bourse may not materialise in the near term.

The recent aborted land deal between IWH and Ekovest Bhd, in a related-party transaction, raises concerns that it may weigh on the former’s ability to fetch a higher value for its land bank of more than 4,000 acres in Johor’s Iskandar Malaysia, which has been plagued by the property glut.

A source says IWH’s listing is now scheduled for the second half of this year, instead of the first half as planned.

“Work is in progress for IWH’s listing. The first half is not possible; they are aiming for the second half,” the source tells The Edge.

Analysts are not too optimistic about the listing of IWH, though. Says one: “I think IWH has postponed the listing because it is difficult to get interest for any property listing right now.”

IWH had planned to raise at least RM5 billion from its proposed initial public offering.

Both IWH and Ekovest are controlled by tycoon Tan Sri Lim Kang Hoo, who has stakes of 63% and 32.4% respectively.

Unlike traditional property developers, IWH is not directly involved in property development but sells land to developers and co-invests with them in joint ventures (JVs).

An analyst stresses that when a listing takes place depends on the value of IWH’s assets. The key factors taken into consideration are pricing, demand and location.

“The population density is low in Johor. If there is no demand, how can they sell the land?” she says.

Another analyst agrees, saying it may not be able to fetch good value for its land. “Yes, the market condition is better than six months ago, but you still can’t maximise your value.

“While IWH can sell land and go into a JV with other developers, we have to see what kind of partners they are going to bring in. And there is the turnaround time — how fast they can enter into a JV or sell and monetise the land.”

IWH recorded net losses of RM90.95 million and RM90.31 million for the financial year ended Dec 31, 2018 (FY2018) and FY2017 respectively, according to a company search on CTOS. Prior to that, it reported net profits of RM39.66 million, RM339.29 million and RM173.17 million in FY2016, FY2015 and FY2014 respectively.

On the land deal between IWH and Ekovest that was called off, the second analyst believes it has less to do with the outlook for Iskandar Malaysia. “I don’t think it was due to the location of the land in Iskandar Malaysia. It is more of an internal issue in terms of the restructuring of all companies controlled by Lim.”

Last Monday, Ekovest scrapped the proposed acquisition of 96.28 acres of freehold land in Pulai, Johor, from IWH for RM1.11 billion, as both parties were unable to reach an agreement on the transaction.

Ekovest’s share price barely reacted to the news last week, closing at 49 sen last Friday, giving it a market capitalisation of RM1.32 billion.

Its net profit plunged 80% y-o-y to RM18.51 million for the first six months ended Dec 31, 2020, from RM92.35 million, owing to lower contribution from the property, construction and toll operations segments.

The source says IWH and Ekovest are renegotiating terms on the land transaction. A new agreement will be announced in due course. “Ekovest is still keen on IWH’s land. There should be an adjustment to the pricing, as it will be based on the new terms and conditions.”

Nonetheless, the first analyst highlights that Iskandar Malaysia land has lost its shine, as developers have been shifting their focus back to the Klang Valley. For example, UEM Sunrise Bhd, which has huge exposure in Iskandar Malaysia, has been adding to its Klang Valley land bank.

“They [UEM Sunrise] are trying to limit their exposure in Johor with a bigger presence in the Klang Valley, where demand is still better despite competition from many developers.

“Even when the border closure is lifted, it will take some time for Iskandar Malaysia to be revived.”

The analyst believes the oversupply will hinder property developers from actively expanding their presence in Johor.

“There are deals everywhere, but most of them are moving away from Johor,” she says.

Teladan Setia Group Bhd is the newest property stock on Bursa Malaysia. Since its listing on March 16, its shares have risen 31.3% to close at 63 sen last Friday, valuing it at RM507.34 million.

The local stock market had seen no property listing since the flotation of Eco World International Bhd in April 2017.

Despite the weak sentiment in the property market, the analyst is positive on Teladan Setia’s niche of focusing on the Melaka market and developing landed property.

“Melaka’s population density is higher than that of Iskandar Malaysia. The oversupply in Iskandar Malaysia is due to massive high-rise development in the area,” she says.

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