KUALA LUMPUR: PublicInvest Research is optimistic about I-Berhad's decision to issue redeemable preference shares (RPS) exclusively to its major shareholder, Tan Sri Lim Kim Hong, totaling RM100 million.
Shareholders voted in on the proposed RPS at the company's extraordinary general meeting yesterday.
The research firm highlighted that this issuance is a cost-effective method of raising funds and is particularly favourable due to its non-dilutive impact.
"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.
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 a new attraction to its leisure portfolio, SkyCity, reportedly Malaysia's longest glass water slide (600 metres).
"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 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.