KUALA LUMPUR: PublicInvest Research is upbeat on I-Berhad's proposed issuance of redeemable preference shares (RPS) solely to its major shareholder Tan Sri Lim Kim Hong amounting to RM100 million.
The research firm said that the issuance of the RPS is an inexpensive way to raise funds, and is a welcome move considering its non-dilutive effects.
"While net proceeds into the company from this exercise will only amount to slightly under RM55 million considering RM45 million is to be utilised to repay previous advances by its major shareholder, we reckon this is still sufficient for its ongoing development works and working capital needs.
"We are also encouraged by this development as it signifies a strong vote of confidence in the group's long-term prospects and reflects the major shareholder's unwavering financial support towards the success of the company, uncharacteristic of various other corporate exercises that typically involve cash-sapping rights issues and/or dilutive private placement exercises," it said in a note today.
Shareholders will be voting later today on the proposed RPS.
PublicInvest said the 3.0 per cent dividend rate on the RPS also costs lower vis-à-vis bank borrowings.
The firm maintains its trading buy call on the stock with an unchanged target price of 32 sen (about 50 per cent discount to book value versus industry average of 40 per cent).
"Since our recent recommendation upgrade on June 4, the share price raced to a high of 29 sen (+18.4 per cent) before retracing to current levels following the recent market rout.
"We see this as another buying opportunity, remaining encouraged by the group's steady fundamental improvements," the firm said.
PublicInvest said the scope for longer-term upside is still attractive, with about 50 per cent of I-Berhad's gross development value (or about RM5 billion) yet to be realised, in addition to the growing traction from its investment- and leisure-related portfolios.
I-Berhad recently unveiled, at a ground-breaking ceremony officiated by Selangor Menteri Besar Datuk Seri Amirudin Shari, a new attraction to its leisure portfolio, SkyCity, reportedly Malaysia's highest glass water slide standing at 60 metres tall.
"While the cost of this new attraction has not been disclosed, we view this development positively as the group strives to maintain the momentum made from its recent leisure-related contributions in recent quarters," the firm said.
SkyCity is a 60-metre high tower featuring a 600-metre long glass slide. It is slated to open on Dec 11, 2024.
This new attraction, among others, is expected to contribute notably to the state government's Visit Selangor 2025 initiative, and potentially lead to the drawing of about five million local and international tourists into i-City next year.
Selangor has a seven million tourist target for 2025.
"To note, I-Berhad's leisure and hospitality segment saw sustained revenue contributions, amounting to RM25.9 million (+25.8 per cent) year-on-year, (-3.1 per cent) quarter-on-quarter in the recent first quarter of 2024.