Photographer: Charles Pertwee/Bloomberg

World's Top Small-Cap Stock Seeks $1.1 Billion to Develop Land

Updated on
  • Property developer Iskandar Waterfront has surged on land deal
  • Company plans to raise funds via issuance of convertible debt

Iskandar Waterfront City Bhd., the world’s best performing small-cap stock this year, isn’t done yet after a plan to boost land assets in Malaysia led to a surge in its shares.

The property company plans to raise as much as 5 billion ringgit ($1.1 billion) via convertible bonds mainly to develop the real estate that it’s acquiring, Executive Vice Chairman Lim Kang Hoo said in an interview last week. Iskandar Waterfront is also seeking a secondary listing in Hong Kong or China to attract a wider pool of investors, he said.

Shares of Iskandar Waterfront have jumped more than 270 percent this year on a plan to create an entity with land assets worth 47 billion ringgit, making it the top performer on the S&P Global Small Cap Index of more than 8,500 companies globally this year. That’s for a company that has no analysts covering it and which incurred a net loss of 15 million ringgit in fiscal 2016.

The share surge came after the company became the target of a reverse takeover by Lim and his business associates including the Sultan of the state of Johor, where the developer has 7,400 acres of land -- equivalent to about nine times New York City’s Central Park. The stock is currently valued at 3.7 times its book value excluding the land acquisitions through the takeover. 

Iskandar Waterfront is buying the land at a net asset value of about 120 ringgit per square foot, compared with a current sale price of 400 ringgit to 1,200 ringgit per square foot in Johor, and 2,000 ringgit to 2,500 ringgit per square foot for its project in capital Kuala Lumpur, Lim said.

“I will leave it to the investors to decide on the value and potential of the company," Lim said. Iskandar Waterfront shares gained 0.7 percent as of 10:36 a.m. in Kuala Lumpur.

Investors have made a beeline for Johor in recent years after Malaysia decided to leverage on Singapore’s success by building the Iskandar Malaysia special economic zone across the causeway that connects the two countries. The zone has received 227 billion ringgit in investments since its inception, according to the Iskandar Regional Development Authority.

Iskandar Waterfront has roped in partners including Temasek Holdings Pte, Singapore’s state investment company, and China’s Greenland Group to develop parts of Johor and is talking to more parties for potential land sales, he said. The company also has a stake and development rights to Bandar Malaysia, a property project in the heart of Kuala Lumpur that would host terminals for the Singapore-Kuala Lumpur high-speed rail and offer future access to major highway networks.

“We are the master developer and our role is to bring in strategic partners to develop these lands,” said Lim, who partnered with China Railway Engineering Corp. to win an international tender for the rights to develop Bandar Malaysia from controversial state fund 1Malaysia Development Bhd.

    Before it's here, it's on the Bloomberg Terminal.