JKH share price to see more volatility owing to the Integrated Resort Project : Analysts
View(s):The John Keells Holdings PLC (JKH) share price will see more volatility in the next few months following the launch of its new Integrated Resort Project in Colombo 2 where the head office is located, analysts say.
This land is owned and occupied by subsidiaries Ceylon Cold Stores PLC (CCS), John Keells PLC (JKL), John Keells Properties (Pvt) Ltd (JKP) and Waterfront Properties (Pvt) Ltd.
Analysts say that the share which rose by 36 per cent during January to May this year and saw a record high of Rs 299 on May 21 largely due to the Integrated Resort Project has fallen by 19 per cent over the past month. “Short term price appreciation may be limited given the subdued outlook for its main sectors. Amidst the uncertainty of the Integrated Resort Project’s success and its magnitude, the company’s balance sheet and its short to medium term earnings will be impacted,” a CT Smith Stockbrokers research report said. It said that this project has the potential to be a ‘game changer’ in the long term especially with the gaming, its prime location and the company’s expertise in property development.
According to the company, the anticipated investment in the project by JKH is greater than half the value of the assets of JKH as at 30 June 2013. The company also disclosed the project details and its funding structure for the US$820 million Integrated Resort. JKH said that it would directly hold 79.24 per cent (effective control of 96.70 per cent) of the project company Waterfront Properties (Pvt) Ltd whilst CCS, JKL and JKP would own 14.15 per cent, 5.03 per cent and 1.57 per cent, respectively. It is expected that the Phase I would cost US$ 650 million and the project is targeted to be completed within 5 or 8 years depending on the timing of Phase II. Once completed the project would consist a total build up area of some 4.5 million square feet.
The initial investment in the project company will comprise land of US$ 60 million, equity infusion from JKH of about US$240 million and debt for the balance by the project company “The project will have a debt: equity ratio of 60:40,” an analyst said. The company has mandated a leading foreign financial institution to structure and raise the required debt financing.
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