PETALING JAYA, March 16 — IJM Corp Bhd plans to exit its highway investments in India as part of its efforts to unlock shareholder value.

This follows IJM’s independent adviser, M&A Securities Sdn Bhd, stating last Friday that Sunway Bhd’s takeover offer of RM3.15 per share is not fair and not reasonable, recommending shareholders reject the offer.

Group chief executive officer and managing director Datuk Lee Chun Fai said the proposed India exit forms part of the group’s strategy to streamline its portfolio and allow the market to better recognise the value of its assets.

“As part of its strategy moving forward, IJM plans to exit its India investments by monetising two toll highways and three property developments in the country,” he told a media briefing here today. 

Lee said that as IJM expands further into the United Kingdom (UK), managing exposure to multiple foreign currencies adds complexity to the group’s operations.

“Over the past three years, our India operations recorded losses of about RM184 million. Currency depreciation has affected returns, and accounting standards require us to mark these assets to current exchange rates.

“Our strategy is therefore to monetise these assets and redeploy the capital into areas with stronger growth potential,” Lee said.

He said IJM’s business model has always been to build assets, nurture them and eventually monetise them once they mature.

“For example, when we sold the Trichy toll assets, we paid a special dividend. Similarly, when we divested IJM Plantations, we distributed special dividends to shareholders,” he said.

On the UK investments, he said the group has been actively investing for the past two years. The two key assets are the 88 Royal Mint Street development and 25 Finsbury Circus.

The group’s approach is to build the assets and secure tenants in advance, thereby reducing investment risk, he said.

“The Royal Mint project is (in) the second phase of development. We have secured a lease with a hotel operator, allowing us to collect rental income once the building opens without taking on the operational risks of running the hotel.

“Similarly, for Finsbury Circus, we have secured a lease agreement with the law firm Simmons & Simmons LLP, which has taken up 61 per cent of the space with an option to expand to 80 per cent, significantly de-risking the investment and ensuring income certainty,” he said.

The group has invested in logistics assets such as the Shah Alam International Logistics Hub and EXIO Logistics in Malaysia. IJM is both investor and contractor, creating synergies by undertaking construction works while also supplying building materials through its industry division, he said.

On Sunway’s takeover bid, he said M&A Securities’ assessment estimated IJM’s share value at RM5.84 to RM6.48 apiece, while Rothschild & Co’s separate assessment put it at RM4.80 to RM5.63 per share.

“When both independent valuations are compared with the offer price of RM3.15, it is clear that the offer represents a substantial discount. Based on these valuations, the discount is approximately 47 to 52 per cent relative to the fair value of IJM shares,” he said.

To better understand IJM’s valuation, it is important to recognise that many of its assets are still in the incubation stage, he said.

“Asset-heavy investments take time before they begin generating returns. During the gestation period, earnings may not immediately reflect the value of the investment,” he explained. 

He cited the group’s West Coast Expressway (WCE) as an example, saying the project has been ongoing for nearly 12 years.

“Initially expected to take five years, land acquisition delays meant that the final piece of land was secured only last December. As a result, returns have been delayed because the asset is still under development,” he said.

“Over time, these investment properties will generate returns. However, many are still in the investment phase and have yet to contribute meaningfully to earnings.

“This is why valuing IJM purely based on current earnings does not fully capture the company’s underlying asset value,” he said.

He said accepting Sunway’s offer would mean shareholders hold only about 20.6 per cent of the enlarged Sunway group, whereas remaining invested in IJM would allow them to retain full exposure to the company’s future growth potential.

“IJM is at a low point in its earnings cycle currently, but at a high point in terms of asset value. Sunway’s offer comes at a time when many of our assets are still developing and have yet to generate their full returns.

“To use a simple analogy, Sunway’s assets are already bearing fruit, whereas IJM is still planting and nurturing trees. When these assets mature, they will produce significant value for shareholders,” he said.

Government-linked institutional investors, including the Employees Provident Fund and Permodalan Nasional Bhd, are among the company’s key shareholders.

Sunway’s takeover offer remains open until April 6. It requires acceptance from more than 50 per cent of shareholders to proceed, failing which the bid will lapse and IJM will remain independent. — Bernama

 Malay Mail – Money