Negative pressure on IWC shares expected

KUALA LUMPUR (May 8): All eyes will be on Iskandar Waterfront City Bhd (IWC) when trading resumes today, with market players saying there could be a knee-jerk reaction in the short term due to uncertainty around the company after a RM7.41 billion deal to buy a 60% stake in Bandar Malaysia Sdn Bhd collapsed.

Fundsupermart.com senior research analyst Lee Tien Xiang is one who thinks that IWC could suffer a sharp sell-off in the short term.

“There could be a panic selling by investors when the market opens [today]. But it will be similar to what we saw in Ekovest Bhd shares [last] Thursday, when the share price initially fell sharply before gradually recovering. I believe IWC’s fundamentals remain strong even without Bandar Malaysia as it only consists of a small portion of the merger [with Iskandar Waterfront Holdings Sdn Bhd (IWH)],” he told The Edge Financial Daily.

Lee also expects the negative sentiment to have spill-over effects briefly on the broader market.

Etiqa Insurance and Takaful head of research Chris Eng sees a knee-jerk reaction to IWC’s share price today, adding that there are still a lot of uncertainties surrounding the Bandar Malaysia development agreement between TRX City Sdn Bhd and the consortium of IWH and China Railway Engineering Corp (M) Sdn Bhd (CREC) at the moment.

“It is a terrible place to be in. IWC has seen its share price more than tripled year-to-date following the announcement of the proposed merger with its major shareholder IWH that would create one of the largest real estate companies. But all these while, the merger is expected to come with its crown jewel — the Bandar Malaysia project — and suddenly, you are told that it won’t be part of the deal. We’ll definitely see an initial selldown in IWC shares,” a fund manager with a local asset management said.

He added that with so much uncertainty about the deal and whether the IWH-CREC joint venture will contest TRX City’s termination notice, investors are likely to dispose of their holdings in IWC and wait for better clarity.

Another analyst is of the view that a selldown in IWC shares provides an opportunity for investors to accumulate.

“The merger itself without Bandar Malaysia would have been a big push for IWC. Of course, with the euphoria surrounding the stock market along with the Bandar Malaysia factor, IWC has surged at an extremely fast pace. A correction would be good,” the analyst said.

Year to date, IWC’s share price has jumped 280% from 81 sen on Dec 30, 2016 to close at RM3.08 last Wednesday. The stock has been trading in a 52-week range of 79 sen to RM3.29.

Trading in IWC shares was suspended for two days from last Thursday, following the shocking announcement by TRX City — a wholly-owned subsidiary of the ministry of finance — that the sale of Bandar Malaysia to IWH CREC Sdn Bhd had lapsed after repeated extensions last Wednesday.

TRX City had alleged that IWH CREC had failed to meet the payment obligations outlined in the conditions precedent under a share sale agreement (SSA) the two parties signed on Dec 31, 2015.

However, in a statement last Friday, IWH CREC dismissed as unacceptable the claims by TRX City, maintaining that it has fulfilled all the required payment obligations under the SSA on its part towards TRX City to date.

The aborted deal saw Ekovest becoming the first casualty, as its largest shareholder tycoon Tan Sri Lim Kang Hoo is also the major shareholder of both IWH and IWC.

Ekovest saw its share price plunging as much as 29.4% to hit an intraday low of RM1.01, before closing down 26 sen or 18.18% at RM1.17 last Thursday.

The stock pared losses to end up two sen or 1.71% at RM1.19 last Friday, with 119.34 million shares changing hands, helped by its managing director Datuk Seri Lim Keng Cheng coming out to say that the company’s fundamentals remain “strong and intact” last Thursday night.

This article first appeared in The Edge Financial Daily, on May 8, 2017.

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