By Khairie Hisyam
With a hard-hitting line-up of directors and seeking to match the collective proceeds of all four previous Spac listings on Bursa Malaysia, Liew Kee Sin’s proposed special purpose acquisition company (Spac) listing is no joke. A successful Spac listing may further hasten the larger Eco World brand’s already meteoric growth rate, but on the other hand it may hurt the existing developer too.
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Mention the Eco World brand and the immediate impression that springs to mind is speed — by any measure, the brand had seen a meteoric growth rate in just over two years.
And should long-time SP Setia boss Liew Kee Sin’s proposed blank-cheque initial public offering (IPO), called Eco World International (EWI), materialises, the brand’s growth may even accelerate further given Eco World Development Group Bhd’s stated intention to subscribe to 30% of the proposed IPO.
While registered in 2012, it was only in 2013 that Eco World Development Holdings Sdn Bhd — originally Maple Quay Sdn Bhd — began turning heads. In April 2013, the company acquired a 613.79-acre land parcel in Johor and a 9.6-acre land tract in Kuala Lumpur from DRB-Hicom Bhd for RM534.7 million and RM69.92 million respectively.
Five months later in September, the company along with Liew Tian Xiong, son of then-SP Setia president and chief executive of nearly two decades Liew Kee Sin, launched a reverse take-over (RTO) exercise to gain a 65% stake in public-listed Focal Aims Holdings Bhd for RM230.7 million in total.
Notably Tian Xiong’s part of the deal was financed by his parents, according to regulatory filings.
Joining the big boys
Going by year-to-date sales and land bank growth, it would seem as if Eco World emerged relatively overnight to rival the big boys of the Malaysian property sector.
As Focal Aims Holdings morphed into Eco World Development Group Bhd over the following months of the RTO with a new-look board comprising former SP Setia bigwigs, an assets injection exercise followed in April 2014, more than tripling both Eco World’s total land bank and gross development value (GDV).
By August 2014, Eco World had clocked in some RM2.14 billion in sales in the eight-month period, stated Liew in an interview with business radio station BFM last month. “For a developer who just started a year ago this is very, very impressive,” remarked Liew.
And indeed it is — while SP Setia’s record-breaking RM8 billion in sales for financial year 2013 (FY13), Liew’s last full financial year in charge, is perhaps too extraordinary a milestone to compare against, other developers posted relatively more modest sales figures last year.
For example Mah Sing Bhd, which first forayed into property in the 1990s, posted RM3 billion in sales for FY13 ended Dec 31 last year, as did UEM Sunrise Bhd for the same period. On the other hand Sime Darby Property posted RM2.15 billion sales for FY13 ended June 30 last year.
In terms of land bank, with the assets injection exercise boosting its land bank and GDV to 4,433 acres and RM43.52 billion respectively, Eco World is firmly in the same league as the likes of SP Setia and IJM Land, who has slightly over 4,000 acres each in land bank each.
The implications of a successful property Spac listing by Liew is a separate, but linked, entity spearheading the Eco World brand’s expansion overseas while the existing listed entity focuses on the domestic market.
On the face of it, having two separate developers flying the same banner on two fronts would accelerate the growth of the larger Eco World brand even further as each would have the resources of one individual property developer.
“With the associate stake in Eco World International, Eco World will be able to venture overseas without excessive leverage,” said AllianceDBS last week. ”Also, it will be able to focus on Malaysian projects which have received overwhelming response from property purchasers.”
Why a Spac?
Liew Kee Sin
It is early days still to see if Liew’s proposed Spac would happen and if it would be successful. But his reputation from growing SP Setia for nearly two decades would have investors salivating at the prospect of his latest adventure, especially now that he is essentially eyeing a bigger pond in international property markets.
The underlying question, however, is why Liew chose a Spac as his next vehicle.
Liew did not respond to KiniBiz requests for comment and phone calls to his mobile were unanswered.
However the benefit of a Spac is apparent. A Spac is essentially a blank cheque for the management team of the Spac based on previous track record and represents a convenient way to tap into the capital market for funds as opposed to going to the banks — which is likely harder without an existing business — or using personal wealth to start a new venture, which is riskier for the individual.
For Liew, it would be a way to tap into the strength of his personal brand cultivated over nearly two decades helming SP Setia into arguably Malaysia’s foremost property brand.
His proposed Spac may raise up to RM1.9 billion in initial public offering (IPO) proceeds and that is an enormous capital by any measure for a new venture. As noted in the previous part in this series, that amount matches the cumulative proceeds of all previous four Spac listings in Malaysia.
Another apparent benefit is that it represents a fast track to starting a new listed venture with a clean slate.
Had Liew gone the traditional route, he would have had to either build a new company from scratch and subsequently list it on Bursa Malaysia or acquire an existing property development company, either listed or non-listed, with the debts, obligations and history that comes with the package. Both would entail raising funds on his own and, if he had chosen the new build-up route, take much longer to do.
In that context, Liew’s choice of undertaking a Spac listing is a much faster, simpler way to start a new venture with a strong capital amount.
And this route is only made possible by the strength of his name and reputation in the property market. “There’s a euphoria about Spacs and he’s probably riding it,” said one corporate watcher.
The other Eco World
However the other side of the coin is that Liew’s proposed Spac, if successful, may negatively impact the existing Eco World property development entity.
When Eco World’s intention of subscribing to the Spac was announced, analysts expect the Sydney properties offered to it by its major shareholder in May to be the first acquisition of the Spac after listing.
“A 1.2-acre land located at Church Street in Sydney, Australia held by the unlisted Eco World Sdn Bhd will likely be injected into the Spac, we believe,” opined Maybank Kim Eng last week on the proposed Spac listing.
Eco World’s major shareholder Eco World Development Sdn Bhd had originally acquired the land parcel from Menara Parramatta Pty Ltd for AUD$28 million (RM84.7 million) and offered to sell it for the same price to Eco World on May 9.
The reason for the arrangement was attributed to the need to close the deal quickly which was not possible due to the need for board and potentially shareholders’ approval, said the company.
“It is a key term of the contract of sale that the vendor (Menara Parramatta) requires the purchase price to be fully settled by 30 May 2014,” said Eco World. “As such, it is not possible for Eco World to acquire the property directly from the vendor within the time-frame stipulated.”
However last month Eco World deferred the purchase from its major shareholder for the second time in three months, explaining that it is currently evaluating other opportunities too.
The emerging possibility of a successful Eco World International listing by Liew is that the Spac entity, focusing on international property markets only, would in turn cannibalise on Eco World’s own opportunities to venture overseas given the 30% stake it would have in the former.
Essentially, Eco World would be restricted to the relatively limited Malaysian property market while Liew’s Eco World International swims in a much larger pond. One possibility that follows is potential conflict between the board of Eco World and the potential board of Eco World International.
In a radio interview with BFM last month, Liew opined that Eco World would definitely go international when asked whether going overseas is an aim for the company.
“(Eco World’s plans are) presented to the board every quarter — the plans, etc,” said Liew. “I’m sure Chang and his team will go global.”
Yet Liew’s proposed Spac listing would essentially place a glass ceiling on Eco World in terms of future expansion as, while there is much room for growth in the domestic market, Malaysia’s property sector is still small compared to many other markets globally.
In comparison, Eco World’s public-listed peers in Bursa Malaysia would not have such constraints in growing beyond Malaysian shores.
Miles to go to IPO
That said, the proposed Eco World International listing still has a long way to go before it debuts on Bursa Malaysia.
Notably, all four previous Spac listings in Malaysia are for the oil and gas sector. Proposed Spacs for other sectors, such as proposed mining Spac Terragali Resources and proposed food and beverage (F&B) Spac Red Sena F&B, did not materialise.
The first hurdle for Liew, then, is getting regulatory approval to proceed with his proposed Spac listing. “If anyone can make a property Spac happen in Malaysia, Liew can,” said a corporate observer.
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On Thursday: Will Liew rise on the back of Battersea?
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