Landmarks' RNAV & Sungei Wang REIT

This is not an attempt to further promote Landmarks but rather a clarification. The RNAV looks at the book value of assets and compare that to the independent valuation or closest to market valuation. Then we take the market values with the corresponding capital rates, deduct the book value to get the revaluation surplus. We then add the revaluation surplus to shareholders funds to get the RNAV.

Datai 33% - RM125m
Datai Hotel 33% - RM85m
Datai Golf Course 33% - RM7m
Datai Land 33% - RM35m
Andaman 100% - RM145m
Sungei Wang Plaza 100% - RM560m
Shangrila Hotel 27% - RM300m
Teknologi Tenaga Perlis 20% - RM225m
Landmarks Land 20% - RM35m

The assets under Landmarks are mainly good class assets and many are REIT-able. The company has stayed under the radar for a long time because the controlling shareholder was holding just 18% and did not have the financial muscle to get a bigger stake. The recent popularity of REIT makes a lot of sense to other predators to control Landmarks as they could unlock a lot of hidden values in the stock. It appears that there are now more than 2 parties keen to get control of the company, which bodes well for Landmarks and their minority shareholders.

The first step to unlocking is via the SungeiWang-Andaman REIT. Back in Sep 2005, the company proposed a SungeiWang REIT and that was shockingly rejected in Feb 2006 due to only one property and a low stakeholding in SWPlaza with no growth plans. A new REIT proposal was submitted in the same month. In April 2006, the new SW-Andaman REIT was approved. Last month the Securities Commission approved the disposal of SWP and Andaman. The REIT should list by October 2006. One can expect a cash dividend of 50 sen per Landmark share or get one free REIT for every two Landmarks shares held.

The next unlocking step could involve the attractive Shangrila Hotel shares. The company could distribute the shares to Landmarks' shareholders, which works out to be worth another RM0.64 per share, add that to the REIT's RM0.50, its looking good. But a caveat here, the Shangrila stake has largely be pledged as collateral for a RM185m RSS Bond, together with cash flow from datai's operations (hence the non-involvement of Datai in the SW-REIT proposal). Even so, any sale would go down to reducing debt substantially. Hence, it is more likely that the next asset sale will be its 20% stake in Teknologi Tenaga Perlis power plant, very easy to sell owing to the DCF predictability. The power plant stake should bring in RM225m or nearly another 50 sen in pure cash dividend.

Aside from the new shareholders in Zimulia, Killinghall (M) Bhd just announced that its chairman Syed YusofSyed Nasir has emerged as a substantial shareholder of property group Landmarks. An exchange circular quoted Syed as saying that he had bought 5.23 pct or 24.65 mln shares in Landmarks on the open market. ............ Let the games begin....