ESMART: 50% surge as punters catch on hot RTO

Singapore investors are finally catching on to the RTO on Esmart by KLSE-listed duty free retailer, DFZ --- an investment story that has received much attention from Malaysian media.

CATALIST-LISTED Esmart shares surged 50% over the past 2 days, closing at 3 cents yesterday as one of the top volume stocks on the Singapore bourse.

This came hot on the heels of the approval from the Securities Commission of Malaysia for its reverse take over (RTO) by Malaysia-listed conglomerate Atlan.

The RTO, which entails the injection of its businesses for duty free trading and retailing, property development and hospitality into Esmart, is expected to complete by Feb next year.

To be injected via RTO: KLSE-listed DFZ Capital, which has duty-free complexes and wholesale outlets in Malaysia at popular tourist destinations.

Duty-free cash cow to be injected via RTO

The businesses to be injected include Atlan’s 74.7% stake in KLSE-listed DFZ Capital, which deals in duty-free goods and non-dutiable merchandise, as well as properties and hospitality.

DFZ has 25 duty-free complexes and wholesale outlets in Malaysia at popular tourist destinations such as Johor Bahru, Bukit Kayu Hitam, Kuala Lumpur International Airport, Padang Besar, Langkawi.

It generated net income of M$50.5 million (S$21 million) for the financial year ended Feb 2010 and has market cap of M$755.9 million (S$315.5 million).

Esmart’s RTO has so far escaped the notice of the Singapore media and forumers, but thanks to the consumer business that DFZ is in, it has received much attention from the Malaysian media.

Analysts have also been quoted by the Malaysian media to have described DFZ as a cash cow with a firm foothold and leading position in Malaysia’s duty-free market, as well as a monopolistic position in border-town duty-free sales.

The ZON Regency Hotel at ZON Johor Bahru

Prime water-front commercial real estate also to be injected

Also to be injected into the RTO entity is Atlan’s 100% stake in Darul Metro, which owns the ZON Johor Bahru, a property development on prime commercial real estate with a gross floor area of about 1.6 million square feet.

ZON Johor Bahru is one of the largest duty free zones in Malaysia, and Darul Metro’s assets to be injected into the RTO entity have been independently valued by Knight Frank to be worth M$220 million as at Jun.

This valuation is likely to increase, since ZON Johor Bahru is less than 2 km down a straight road to Tanjung Puteri in Johor Bahru, which will be linked to Singapore by MRT by 2018.

Currently, one takes 10 minutes by car from the Singapore Causeway to reach ZON Johor Bahru and its exclusive facilities which range from convention halls, hotel, shopping areas and a multi-storey carpark, customs and immigration checkpoint and office building and ancillary buildings spread out over 14 acres of prime waterfront land.