Sunday, February 13, 2011

KrisAssets Holdings goes shopping

KrisAssets Holdings Bhd (6653), the owner and operator of Mid Valley Megamall, is believed to be buying four-year old The Gardens Mall in a deal estimated to be close to RM1 billion.

This move will provide KrisAssets, which essentially operates like a real estate investment trust, a new avenue for recurring income.

At the same time, Mid Valley Megamall developer IGB Corp will be able to unlock the value of its assets.

"IGB is a developer that carries development risk. KrisAssets is a pure play asset yielding entity," an industry observer familiar with the company said.

Both companies had requested for the suspension of their shares from 2.30pm yesterday and on Monday February 14, pending the announcement of a proposed material transaction.
Shares of IGB closed at RM2.32, while those of KrisAssets closed at RM3.90 at the end of morning trading yesterday.

The board of one company is said to have deliberated yesterday and the other will do so on Monday. An announcement is expected on Monday.

This deal, should it happen, does not come as a surprise. KrisAssets' group managing director - who is also the managing director of IGB - Robert Tan has always voiced plans to inject The Gardens Mall into KrisAssets when it achieves profitability.

He was quoted as saying that the one- to two-year timeframe to sell The Gardens was part of IGB's roadmap. IGB owned 74 per cent of KrisAssets as at April 2010.

IGB, in its 2009 annual report, gives The Gardens Mall, together with 4,300 parking bays, a net book value of RM594.04 million. The property is on leasehold until 2103.

The Mid Valley Megamall, meanwhile, has seen its market value steadily rise. In June 2010 it was valued at RM1.85 billion. This compares with 2006 when it was valued at RM1.68 billion.

Based on the value, the industry estimate for The Gardens could be between RM800 million and RM1 billion.

In the nine months ended September 30 2010, IGB made a net profit of RM121.23 million on revenue of RM504.38 million. In the year ended December 31 2009, it made a net profit of RM179.22 million.

KrisAssets, meanwhile, churned in a net profit of RM200 million in the year ended December 31 2010 and revenue of RM239.4 million. In December 2009 it made a net profit of RM136.02 million.

Source: Business Times 13 Feb 2011

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