Eco World International Bhd’s (KL:EWINT) private placement in May, a secondary one, may be considered a success on many fronts.

The deal involved 648 million ordinary shares, representing 27% of the issued and paid-up capital of EWI.

As many would know, the block of shares belonged to tycoon Tan Sri Quek Leng Chan and was held through GLL EWI (HK) Ltd, a unit of GuocoLand Ltd.

Quek’s exit from EWI was executed seamlessly, given how speedily GLL EWI was able to find an investor in Paramount Corp Bhd (KL:PARAMON) which was keen to take up 80% of the stake.

 Paramount, which is also a seasoned property developer but with a focus on Malaysia, acquired 21.54% of GLL EWI’s stake in EWI at 33 sen per share, bringing the total value of its investment to RM170.61 million. This was done through its wholly-owned subsidiary Flexsis Sdn Bhd.

The remaining 5.46% stake was placed out through a book building process with participation from institutional investors, raising the remaining RM43.19 million for GLL EWI.

Paramount’s acquisition price of 33 sen was at an 8.3% discount to EWI’s closing price on May 10 of 36 sen per share and at a smaller discount of 5.8% from the five-day volume weighted average price.

Paramount’s entry as a strategic investor in EWI boosted investor sentiment for both counters.

After the deal was announced on May 10, EWI’s share price climbed 22% to 44 sen on May 23, from 36 sen on the day of the announcement. Paramount shares moved from RM1.14 on May 10 to hit a year high of RM1.29 on May 20.

The deal seems to have made winners of all three parties involved.

For Paramount, EWI’s commitment to clear its completed stocks worth RM850 million as at Oct 31, 2023, and to distribute its excess cash to investors as dividends by its financial year ended Oct 31, 2024 (FY2024), meant that the former is forking out less than the acquisition price of RM170.61 million for the 21.54% stake.

A back-of-the-envelope calculation shows that Paramount stands to gain more than RM100 million in dividends if all the inventories are cleared.

For EWI, Paramount’s entry as a strategic investor with strong financials but without direct control over its day-to-day affairs must seem like a good fit.

As for the vendor and Quek indirectly, they made a gain of 22% from their exit from EWI, according to AmInvestment Bank, the sole placement agent for the deal. It is worth noting that GuocoLand was a strategic investor and co-anchor in EWI’s IPO in 2016, along with Eco World Development Group Bhd (KL:ECOWLD). EWI’s IPO price was RM1.20.

EWI, whose property projects are predominantly in the UK and Australia, was in the red in FY2022 and FY2023, registering net losses of RM234.2 million and RM85.37 million respectively, owing to rising costs and high interest rates, among other things. Its strategy of deferring new launches also constrained its ability to generate revenue and profit.

However, by prioritising cash generation and preservation through sales of completed stocks and repatriation of capital invested with a key goal of returning excess cash to shareholders, EWI increased its net cash from RM131.4 million at end-FY2022 to RM295 million at end-FY2023.

It cleared its borrowings in FY2023 and had RM273.03 million in bank balances as at end-FY2024 while net losses narrowed to RM34.35 million in FY2024.

Investors that had scooped up shares in Sunway Bhd (KL:SUNWAY) through two rounds of private placements in January and May this year — raising a combined RM1.05 billion in funds in exchange for a total shareholding of 6.29% in the conglomerate — would be yielding handsome returns on their investment. Sunway shares have enjoyed significant growth this year, climbing 119%.

In the first round, Sunway founder and chairman Tan Sri Dr Jeffrey Cheah Fook Ling, through his family investment vehicle Sungei Way Corp Sdn Bhd, had raised RM345 million from an accelerated book-building exercise, placing out 150 million shares, or 2.74% of the conglomerate’s share capital, for RM2.30 apiece on Jan 16. The transaction was priced at a tight discount of 2% to the five-day volume-weighted average price (VWAP) of Sunway shares as at Jan 16, despite its share price having risen 7% year to date.

There were orders from 21 investors, approximately 1.9 times the book coverage when the book-building closed. Non-government-linked investment companies (GLICs) took a 75% chunk of the shares being offered, while the rest were scooped up by GLICs. Assuming that investors had held Sunway shares from Jan 16 to Dec 20, 2024, they would have seen a return of 105%.

The Cheah family sold a further 200 million shares, equivalent to 3.55% equity interest, for RM704 million or RM3.52 apiece on May 30. The offer price represented a 2.8% discount to Sunway’s closing price of RM3.62 on May 30 and a 4.8% discount to the counter’s five-day VWAP of RM3.6975.

The deal was approximately 1.5 times covered after its order book was closed, attracting 16 placees. About 40% of the shares were placed out to GLICs, 17% to foreign funds and the remaining 43% to non-GLICs and individuals. The stock has gained 34% since then.

The May transaction effectively reduced Cheah and his family’s stake, through Sungei Way Corp, in Sunway to 45.41%. They also own shares in the conglomerate through Jef-San Enterprise Sdn Bhd and directly.

CGS International and Hong Leong Investment Bank acted as joint placement agents for the January deal while CGS International was the sole placement agent for the May private placement.

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