This article first appeared in The Edge Malaysia Weekly on October 2, 2023 - October 8, 2023

TAN Sri Lim Kang Hoo’s proposal announced last Wednesday to reorganise various businesses and assets owned by him and related parties marks another of the tycoon’s attempts to monetise the massive land bank held under Iskandar Waterfront Holdings Sdn Bhd (IWH).

IWH, which is 63% owned by Lim’s Credence Resources Sdn Bhd and 37% by Kumpulan Prasarana Rakyat Johor Sdn Bhd, has 3,250 acres of land bank, mainly in the Johor Bahru city centre near the waterfront. Meanwhile, IWH’s 34.3%-owned Iskandar Waterfront City Bhd (IWCity) owns 392 acres in Johor.

The reorganisation comes at a time of rising interest in the southern state on the back of news flow on the Johor-Singapore Special Economic Zone (SEZ) and the construction of the Rapid Transit System (RTS) connecting Woodlands in the island state and Bukit Chagar in Johor Bahru.

“The timing is right with the implementation and execution of the RTS project, which is reaching 30%-40% completion, and the SEZ. These are the catalysts for this exercise to consolidate and rationalise the group so that it becomes bigger and better financially to undertake future projects,” says Lim.

The reorganisation also coincides with the impending expiration of the two-year extension for the Employees Provident Fund (EPF) to exit from Konsortium Lebuhraya Utara-Timur (KL) Sdn Bhd (Kesturi), which operates the Duta-Ulu Klang Expressway (DUKE) Phase 1 and Phase 2. Kesturi is an indirect subsidiary of Ekovest.

EPF bought a 40% interest in Kesturi in 2017 for RM1.13 billion. The transaction included an “exit event” in the form of a listing or a trade sale of Kesturi five years from the completion date of the deal. There is an automatic two-year extension following the end of the five-year period.

Could the exercise pave the way for a listing of the toll operations?

Lim, 68, does not discount this but says Ekovest has other options on the table as well, and points out that the two years of the pandemic need to be taken into consideration too.

“Let us finish steps one to four first. There’ll be another proposal to monetise the highway,” he says, referring to the four proposals in the reorganisation exercise.

The first involves the merger of Ekovest and Knusford Bhd; the second, the acquisition by Ekovest of parcels of land located in Johor intended for transit-oriented development along the RTS; third, Ekovest’s acquisition of 51% of Credence Resources; and fourth, the amalgamation of properties and assets owned by IWH and IWC under a single entity.

The proposals, if approved by the board and shareholders of the respective companies, will lead to similar business segments within Lim’s stable of companies held under an enlarged Ekovest to streamline and rationalise the businesses and assets, consolidate his direct shareholding in the companies and avoid potential conflicts of interest.

Lim, who is a major shareholder of Ekovest, Knusford, IWH and IWCity, said in Wednesday’s announcement that he had written to the boards of the respective companies for them to consider his proposals to undertake a reorganisation, rationalisation and merger plan involving these companies.

Ekovest also owns approximately 62% in PLS Plantation Bhd. Lim has 33% in Ekovest and 56% in Knusford.

After the completion of the exercise, Lim’s business interests will all be held under Ekovest, in four distinct divisions: property, plantation, construction and toll operations.

Those who have been following Lim would know that there had been numerous attempts in the last decade to unlock the value of the Johor land bank held under IWH.

Back in early 2017, one proposal involved a merger between IWC and IWH, which would have seen the latter take over the listing status of former. The exercise also entailed a restructuring that involved the acquisition of various properties by IWH.

The rationale for the merger then was not unlike its proposal last week, that is, to consolidate the existing land bank in Johor controlled directly or indirectly by Lim with the properties and assets of the IWH Group, which is expected to result in the enlarged IWH Group having a sizeable land bank of about 6,800 acres under a single listed entity. The mitigation of potential conflicts of interest was also cited as the basis for the exercise.

However, the deal was scrapped and replaced by another proposal to consolidate IWC into Ekovest. But shareholders of Ekovest did not approve the resolution pertaining to the proposed offer.

This was followed by plans in 2019 for IWH to dispose of parcels measuring 96.27 acres to Ekovest. A listing of IWH in 2021 to raise at least RM5 billion would have been next, raising much-needed funds for the development of the multi-billion Bandar Malaysia development project in Kuala Lumpur.

However, these did not pan out.

Whether Lim will achieve his objective this time around remains to be seen but he says the proposals are fair and reasonable.

The boards of the respective companies have up to Oct 27 to revert on Lim’s proposal.

As for the valuation of the assets under the various proposals, according to the appendices to the announcement, it will be based on a “willing buyer and willing seller” basis, taking into consideration the audited net asset value of the target companies plus a potential premium to be negotiated and agreed upon between the parties.

The time frame for the completion of the various proposals could be as long as 18 months.

Upon completion of the exercise, IWH and IWCity will anchor Ekovest’s property division. Lim envisions the unit divesting its strategic land bank via a tender process similar to Singapore’s Urban Redevelopment Authority to ensure an orderly development of Johor.

The listed companies have seen active trading since late August, especially Ekovest and IWCity. Shares in Ekovest reached an intra-day high of 61.5 sen on Sept 25 but fell to close at 55.5 last Friday, valuing the company at RM1.65 billion.

Meanwhile, Knusford, which will hold the constructions business after the reorganisation exercise is completed, rose 10.6% on Friday from its opening price of 89.5 sen to reach 99 sen during intra-day trade. It closed at 91.5 sen, valuing it at RM91.2 million.

Shares of IWCity had moved 54.6% from 48.5 sen apiece on Aug 25 to last Friday’s close of 75 sen, giving it a market capitalisation of RM690.8 million. 

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