KUALA LUMPUR (March 14): In its independent advice circular (IAC) to shareholders of IJM Corp Bhd (KL:IJM) on the conditional voluntary takeover offer by Sunway Bhd (KL:SUNWAY) at RM3.15 per share released on Friday, M&A Securities Sdn Bhd advised that the offer is not fair and not reasonable.

Following the issuance of the IAC, IJM group chief executive officer Datuk Lee Chun Fai is proposing to restructure the group into several pure-play listed entities to better reflect its embedded value. 

Speaking to The Edge in the first interview since Sunway proposed a takeover, Lee says the offer undervalues IJM because of the holding company discount that was ascribed by the market on the group's shares. The current structure doesn't allow for each of the businesses to shine on their own, while muddying the overall prospects of the group. 

According to Lee, there are no other ways for IJM to show its value other than by spinning-off its businesses into pure-play listings. 

“Because when you put everything in the basket – you got highways, projects, companies that are doing well, and also maybe like our Indian operation which is not doing so well. So when you add everything together, you have an averaging effect.

“Our construction is actually doing very well with all these data centre [projects] and NPE2 (New Pantai Expressway) extension and things are looking quite right but if it's priced as a group, you have the plus and minus,” says Lee when met at IJM’s headquarters in Petaling Jaya.

However, this plan hinges on the current board of IJM led by Lee remaining at the group. If the major shareholders of IJM, namely the Employees Provident Fund, Permodalan Nasional Bhd and Kumpulan Wang Persaraan (Diperbadankan), as well as other shareholders decide to accept Sunway's offer of RM3.15 apiece, there is a possibility that the plan might not materialise. 

With M&A Securities saying that the offer is not fair and not reasonable, considering the deep 46.1% to 51.4% discount to the estimated value ascribed to each IJM shares of between RM5,84 and RM6.48, the question remains whether shareholders are willing to give the current board led by Lee a chance to realise the group’s value.

Read the story in this week’s issue of The Edge Malaysia.  

Meanwhile for years, many companies on Bursa Malaysia have faced the same frustration: While they are profitable and fundamentally strong, their valuations trail those of their regional peers.

The Securities Commission Malaysia is seeking to close the gap with a programme that encourages public listed companies to sharpen their focus on value creation, boost capital efficiency and communicate more clearly with investors.

It is not a novel idea. Markets such as Japan and South Korea have introduced similar initiatives in recent years to address valuation discounts and improve capital efficiency, while Singapore has paired disclosure reforms with capital injection programmes designed to channel institutional funds into local equities.

Still, closing the valuation gap on Bursa may prove harder than just encouraging companies to publish more numbers or set new targets. If deeper structural issues such as liquidity constraints, governance concerns and limited investor participation remain unresolved, can a “value-up” programme alone really lift the market’s fortunes?

Grab a copy of the weekly today to read more on the “value-up” programme and IJM’s plans should Sunway’s takeover offer fail.

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