This article first appeared in The Edge Malaysia Weekly on May 15, 2023 - May 21, 2023
THE share price of hardly traded IGB Bhd shot up to a record high of RM3.10 in March. While the stock has pared some gains in recent weeks and closed at RM2.99 last Thursday, it has still gained 29% year to date compared to a 24% rise in 2022 and a decline of 23% in 2021.
Indeed, the share price of IGB, which holds a 53.4% stake in IGB Real Estate Investment Trust (REIT) and 52.8% in IGB Commercial REIT, has climbed about 80% from its trough of RM1.69 in September 2021 — the same month that the company listed its commercial REIT.
The counter is currently trading below its net asset value per share of RM4.17 as at end-March, despite the upward trend.
The value of IGB’s shareholdings in the two REITs alone is more than its market capitalisation.
IGB’s stake in IGB REIT is worth RM3.4 billion, based on the retail REIT’s market capitalisation of RM6.36 billion as at last Thursday. Meanwhile, IGB had a market cap of RM2.69 billion, based on the counter’s closing price of RM2.99 on the same day.
IGB REIT’s portfolio comprises Mid Valley Megamall and The Gardens Mall in Kuala Lumpur.
Meanwhile, IGB’s 52.8% stake in IGB Commercial REIT is valued at RM633.6 million based on the REIT’s RM1.2 billion market cap as at last Thursday.
Regarded as the country’s largest standalone office REIT, IGB Commercial REIT was listed during the pandemic in 2021. The assets in its portfolio are seven commercial properties at Mid Valley City, and three in Kuala Lumpur’s Golden Triangle, namely Menara Tan & Tan, G Tower and Hampshire Place Office. After the listing of IGB Commercial REIT, IGB declared a bumper dividend of 12 sen.
The climb in IGB’s share price to a fresh peak has prompted many to wonder what has fuelled the interest. Could it be that the stock in undervalued? Or that there is a likelihood of another corporate exercise?
To recap, the Tan family had made two attempts to take IGB Corp Bhd private — a move to streamline the corporate structure, which was also seen as tightening its grip on the listed entities. IGB Corp was taken private by Goldis Bhd, now known as IGB Bhd, in 2018.
The IGB group floated its first REIT — IGB REIT, which owns retail malls — in 2012. Nine years later, it listed a second REIT, IGB Commercial REIT, whose portfolio comprises office blocks.
On May 29, shareholders will deliberate on a one-for-two bonus issue, among other regular resolutions, at the group’s annual general meeting.
Apart from the bonus issue, IGB has not given any hints on corporate exercises recently.
Nonetheless, there was a leadership transition in November last year when the then group CEO Datuk Seri Robert Tan Chung Meng bowed out from his executive roles in IGB and the two REITs, both of which were listed during his tenure.
The 70-year-old, who was succeeded by his cousin Tan Boon Lee, had floated the idea of spinning off IGB’s hospitality operation into a REIT some years back.
When asked about the hospitality spin-off again in 2021, Robert did not discount the possibility, reportedly saying that “everything is for sale if the time and price are right”.
Analysts, however, do not expect another REIT to be listed soon given that IGB Commercial REIT received the cold shoulder when it was listed during the pandemic.
IGB’s hotel operation has a presence in Kuala Lumpur, Johor Baru, Sydney, London, Heathrow, New York and Manila, with brands including the St Giles and Cititel, according to the group’s annual report.
“[The year] 2023 is set to be an exciting year for us [in Asia]. We will see the reopening of the 390-room Boulevard Hotel in July. Plans are also in place to refurbish The Gardens Residences that same month.
“In 2023, we will also begin searching for expansion opportunities in other key markets to increase our portfolio of profitable hotels [in the UK],” IGB said in its annual report on the prospects of its hotel operations in Asia and the UK.
Apart from the hospitality assets, IGB holds the family’s real estate development outfit Tan & Tan Development Bhd, in-house construction unit Ensignia Construction Sdn Bhd, wastewater treatment plants in China, IGB International School, eldercare business ReU Living @ MiCasa, and co-living space venture through Coliv @ Damai Residence.
“We also looked for opportunities to dispose of non-core assets. For example, in the year [2022], we actively looked for buyers for our land in Subang, Morib and Kundang North. These disposals are expected to be completed in 2023,” the group said in the annual report. The market value of these tracts are not known.
It is worth noting that IGB has been buying back shares on a regular basis. The company bought back 2.858 million shares in 2022, raising the number of treasury shares to 4.286 million. It has continued to mop up shares this year. As at May 10, IGB’s treasury shares stood at some 5.305 million shares, or a 0.586% stake.
The Tan family collectively owns a 53.74% stake in IGB through its private vehicles Tan Chin Nam Sdn Bhd, Tan Kim Yeow Sdn Bhd and Wah Seong (Malaya) Trading Co Sdn Bhd, as well as the personal capacity of Robert and his sister Pauline Tan Suat Ming.
Both Robert and Pauline, together with Tony Tan Choon Keat, are children of the late Datuk Tan Kim Yeow, who founded the family business together with his brother, the late Tan Sri Tan Chin Nam. The latter was the father of Boon Lee.
The family also collectively controls a 40% stake in oil and gas and industrial services provider Wah Seong Corp Bhd, which recently announced a change in its managing director to Gian Carlo Maccagno from Chan Cheu Leong, effective July 1.
With new leadership taking over the reins, it will be interesting to see how they will lead the group into the next phase of growth against the backdrop of an office glut, a sluggish property market, elevated raw material costs and wages, as well as the ongoing economic slowdown threatening the nascent recovery in the hotel segment.
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