With the proposed disposal, the board proposes to pay a special dividend of 80 sen net per share or RM390mil.
As Ambang Sehati will acquire all the assets and liabilities of BR Property, this deal will see BRDB netting RM430mil in cash and the repayment of RM430mil in borrowings and dividends from BR Property to BRDB.
Thus, BRDB will receive a total cash amount of RM860mil. Of this, BRDB plans to reduce its borrowings by RM320mil, pay out RM390mil for the special dividend and use the remaining RM168mil for working capital.
BRDB's borrowings will drop from 0.71 times to 0.38 times, or from approximately RM1bil to RM248mil.
The combined indicative value of RM914mil is marked to market as of Sept 1, 2011, and is also based on an initial yield of 6% for retail assets and 6.5% for the offices. The total capital expenditure is approximately RM572.7mil.
“I must emphasise that this was totally an unsolicited deal. It is worthwhile, reasonable and makes sense,” said BRDB chief executive officer Datuk Jagan Sabapathy.
“When someone offers us a deal at a yield of about 6%, that is a ballpark figure, and we have to look at it.
“A lower yield means a higher selling price, which is good for us. At this price and this yield, it is fair. We get to sell our assets at 6% yield, while most people do it at 7%.”
He added that the board had not conducted an open tender exercise to dispose of the assets as this might negatively impact the smooth operations of the retail centres.
Additionally, there is the risk that the offer may be withdrawn by Ambang Sehati upon expiry of the accceptance date, keeping in mind current economic uncertainties.
“There has been mischief chatter' about us receiving offers for the proposed assets. However no one has come to give us a serious offer for our assets in the last two weeks.
“Now, we have Ambang Sehati coming to buy our four assets collectively, and they are taking the bright stars and the not-so-bright stars lock, stock and barrel,” said Jagan.
“With this proposal, we get to reduce our debt, and now we have working capital. If people are really saying that the economy is slowing down, then isn't it better for me to reduce my gearing level?” said Jagan, adding that that the office market and the retail rental market were softening.
At present, the investment properties division contributes some 5% to total revenue of BRDB's property segment. Jagan said BRDB was not looking to buy another investment property, and would be more focused on land-bank.
“If you notice, it has been the pure property players such as SP Setia, Mah Sing and IJM Land, that have done very well.
“The mixed-bag players like us have seen our share price languishing pretty much at the RM2 level,” he said.
BRDB's independent non-executive director, T Vijeyaratnam, said even without the steady contribution from its investment properties, this did not mean that BRDB's earnings in the coming years would be further reduced.
“In the next two years, BRDB will start recognising earnings from our projects, Verdana in North Kiara, BluWater in The Mines, Medang Serai in Bangsar and The Straits View Residences in Johor,” said Vijeyaratnam.
Ambang Sehati is controlled by BRDB chairman Datuk Mohamed Moiz Jabir Mohamed Ali Moiz. For its quarter ended June 30, BRDB's revenue stood at RM198.9mil, of which RM152.05mil came from property development while RM28.25mil was generated from property investment.
Operating profits derived from the two divisions were RM31.02mil and RM10.62mil, respectively.
For its financial year ended Dec 31, 2010, revenue dropped 31% to RM626.21mil as the group came to the completion of a number of different projects.
Net profit, however, improved 8.7% to RM125.6mil as its property and wood-based divisions were mitigated by higher rental income and fair value gains from investment properties.
By The Star
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