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IJMLAND-WA – Started Trading Under Weak Market Condition


Warrant Price :


Share Price : RM0.970
Exercise Price : RM1.350
Warrants Expiry Date : 11/9/2013
Premium : 62.3%
Gearing : 4.3
Underlying Historical Volatility : 46.5%
Warrant’s Implied Volatility : 32.6%
Delta : 0.56
Effective Gearing : 2.4


The warrant of IJM Land Berhad, formerly known as RB Land Holdings Berhad, (IJMLAND-WA) started trading last Tuesday on Bursa Malaysia when the stock market was suffering a severe drop. This warrant was issued free to subscribers of IJM Land’s recently completed rights issue at an issue price of RM1.35 on the basis of 4 rights shares and 2 free warrants for every 5 existing ordinary shares held.  At the last traded share price of 97 sen and warrant price of 22.5 sen, the subscriber of the rights issues is now suffering a big loss from the exercise.

IJM Land is the property development arm of IJM Corporation Berhad, the premier construction company in Malaysia. This property company was born out of a merger between RB Land and IJM Properties. According to media report, the merger of the two entities has created one of the largest property companies locally with landbank of 10,000 acres and other assets with total market value of RM 3 billion. IJM Properties owns 7,000 acres while RB Land has 3,000 acres. The total land has a potential gross development value (GDV) of more than RM 20 billion to be realised over the next 20 years.

The rights issue which was carried out recently by IJM Land is part of the rationalization exercise which was undertaken to consolidate IJM group’s property operations under the company to create a larger and stronger property-based listed entity with higher sustainable earnings base. At the same time, IJM Land also acquired the remaining 30% interest in RB Land from the vendor Reco Homebuilder (M) Sdn. Bhd. via the issuance of 80.5 million new shares. Following the completion of the rights issue and acquisition, the total paid up capital of IJM Land increased to just over 1.1 billion shares.

In the first quarter ended 30/6/2008, IJM Land reported net profit of RM8.1 million which is some 85% higher than RM4.4 million reported a year ago. After the rationalization exercise, IJM Land is expected to be much bigger in size and the group is expected to show much better performance for the year ended 2009 according to the notes accompanying the quarterly report.

According to the company’s announcement recently, the rights issue only attracted a subscription rate of 71.62%. As IJM Corporation held 69.96% in the company before the rights issue, there were virtually no other subscribers to the rights issue. This is understandable as the share price of IJM Land was trading below the rights issue price of RM1.35. As part of this rationalization exercise, IJM Corporation would subscribe for all unsubscribed rights shares with warrants not taken up by way of excess application. This has resulted IJM Corporation holding 76.5% of the company. This resulted in the company not meeting the public shareholding spread of 25%. IJM Land indicated would apply to Bursa Malaysia for the recognition of a percentage lower than 25% and for an extension of time to comply with its public shareholding spread requirement.

It is of interest to note that IJM Corporation rewarded its shareholders with free distribution of IJM Land warrants on the basis of 1 IJMLAND-WA for every 10 IJM Corporation shares.

IJMLAND-WA at 22.5 sen is trading at a premium of 62.3%. This appears to be expensive but from a trading perspective, IJMLAND-WA can be considered attractive as its implied volatility of 32.6% is lower compared with the mother share short term historical volatility of some 46.5%. However, implied volatility only measures the warrant’s attractiveness at the current underlying price. If the share price declines and sentiment remains depressed, trading in the warrant may not be profitable.

Alan Voon

Warrants Specialist




This article is for information and education only.  It is not a recommendation to buy or sell any securities mentioned in the article. Please exercise your own judgment or seek professional advice for your specific investment needs. We are not responsible for your investment decisions. Our shareholders, directors and employees may have positions in any of the stocks mentioned.


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