UEM Sunrise to buy Eco World?

IS UEM Sunrise Bhd taking over Eco World Development Group Bhd? Rumours are rife that UEM Sunrise and Eco World are merging.

This would make the new entity one of the largest property developers by landbank in Malaysia.

Sources said UEM Sunrise may buy over Eco World in a shareswap deal that could see the latter’s substantial shareholder, Tan Sri Liew Kee Sin, ending up with a 15 to 20 per cent stake in the former.

Khazanah Nasional Bhd, which has a 66.06 per cent indirect interest in UEM Sunrise, may thus see its stake diluted.

“This is one of several proposals by bankers. It makes sense because you will consolidate two major players and create a property champion with a large landbank and brand power,” said a source with knowledge of the matter.

As a combined entity, it will have total landbank of 7,284ha with a potential gross development value (GDV) of RM190 billion.

Sime Darby Property Bhd is the largest landowner in Malaysia with more than 8,093ha.

Bursa Malaysia data showed that there had been several transactions by major shareholders of Eco World since early this year.

“The way Eco World shares were transacted looked like a prelude to a takeover. Eco World shares are actively being juggled around, an indication that something is about to happen,” said the source.

The source also said Khazanah has received several proposals to buy its stake in UEM Sunrise but nothing has materialised.

“The fund has been looking for someone with entrepreneurial and professional skills to lead UEM Sunrise and bring it back to its glory days as one of the top luxury brands in Malaysia. UEM

Sunrise is currently cashing out and reducing its headcount.

Liew is one of Malaysia’s prominent property captains. He has led two of the nation’s premier development companies over the last 28 years, and was instrumental in securing the coveted Battersea Power Station regeneration project in the United Kingdom in 2012.

TA Securities senior vice-president of research Kaladher Govindan said subject to pricing the research house is mildly “negative” on any merger talk.

He said during this challenging environment, developers should focus on clearing unsold inventory to free up capital and redeploy it to existing projects.

“We note that Eco World’s plate is full now with no urgency to replenish its landbank in Malaysia,” he told the New Straits Times.

Kaladher believes that UEM Sunrise is too huge for Eco World to swallow.

“We believe it is better for Eco World to replenish its GDV via the traditional land acquisition method instead of merging with UEM Sunrise to avoid overstretching the developer’s balance sheet.”

Eco World has a remaining landbank of 1,961ha with a potential GDV of RM75.3 billion, while UEM Sunrise has 5,295ha with a potential GDV of RM113.92 billion.

Eco World has 20 projects in the Klang Valley, Iskandar Malaysia and Penang, ranging from affordable to luxury schemes.

UEM Sunrise’s landbank is mostly located in Johor. The company focuses on macro township development as well as highrise residential, retail and integrated developments.

Both companies also have presence overseas.

Eco World has developments in the United Kingdom through its associate, Eco World International Bhd, while UEM Sunrise has projects in Australia.

Source: NST