However, analysts say the move is not to enrich its major shareholders but to reduce the international property developer’s exposure to the weakening UK economy.
“The company has been making losses for years,” said Rakuten Trade vice-president of equity research Thong Pak Leng.
He noted the massive dividend payout is part of a capital reduction exercise as the company probably wanted to reduce its exposure in its overseas projects. “Hence, they paid back the capital to their shareholders (via the bumper dividend).”
On Sept 20, EWI declared a second tranche dividend of RM144 million to add to the first tranche of RM792 million announced in August, bringing the grand total to RM936 million.
For its third quarter ended July 31, (Q3 FY2023), EWI narrowed its net loss to RM12.3 million from RM56.68 million a year ago.
Thong also said it looks like the major shareholders “over-invested in the company” and now have a lot of excess cash.
“Now that many of its projects in the UK have been completed, and the UK economy is not doing very well, it’s best to get the money back to Malaysia,” he told FMT Business.
EWI has 19 existing and upcoming projects in the UK and Australia with a total gross development value of £4.7 billion (RM26.86 billion) and A$700 million (RM2.01 billion), respectively.
An equity markets director, who chose to be unnamed, concurred with Thong, adding he had reservations about the UK’s property industry.
“With EWI primarily focused on residential property in the UK, data points have shown its property market has cooled a lot and prices are coming down, which impacts demand,” he told FMT Business.
“With interest rates much higher compared to where they were 12-15 months ago, the effects going forward from the rapid rate hikes will impact consumers (i.e. mortgages, car loans, and credit cards).
“With interest rates remaining higher for longer, demand will remain uncertain.”
He noted that although the Bank of England (BoE) had held rates at 5.25%, inflation is still at 6.7% according to latest readings.
Last week, the BoE paused its rate hike programme after 14 consecutive increases since December 2021, taking its main policy rate from 0.1% to a 15-year high of 5.25% in August.
The winners
As EWI’s major shareholders are Eco World Development Group Bhd (EcoWorld Malaysia), and Singapore-based GuocoLand Ltd, it is natural the public faces of these brands are EWI and EcoWorld Malaysia founder Liew Kee Sin, EcoWorld Malaysia deputy chairman Leong Kok Wah, and Hong Leong Group executive chairman Quek Leng Chan.
Based on its first tranche dividend of RM792 million or 33 sen per share, and an estimated six sen per share for the second tranche of RM144 million on the back of a share base of 2.4 billion, shareholders can expect a total dividend of 39 sen per share.
At the close yesterday, EWI shares were up half-a-sen at 37 sen, valuing the group at RM876 million. This means the bumper dividend is potentially larger than the group’s market capitalisation.
GLL EWI (HK) Ltd, an indirect wholly owned subsidiary of Guocoland which Quek indirectly controls, holds a 27% stake or 648 million shares in EWI, and will be entitled to RM252.72 million. As Quek, the Guocoland chairman, is not the sole shareholder of GLL, his portion of the pie could not be ascertained.
According on EWI’s filings on Sept 26, Liew’s direct stake of 10.27% or 246.54 million shares entitles him to an estimated RM96.15 million payout.
He also has an indirect interest of 1.24% or 29.71 million shares in EWI, with a dividend entitlement of RM11.59 million.
Meanwhile, Leong will receive a dividend payout of RM780,000 from his personal shareholding of 0.08% or two million shares.
Media reports previously indicated he held a 30.3% stake, or 728.73 million shares, in EWI through Eco World Capital (International) Sdn Bhd and Sinarmas Harta Sdn Bhd.
EWI has since clarified that Eco World Capital, a wholly owned subsidiary of EcoWorld Malaysia, and Sinarmas are not owned by Leong.
As it stands, Eco World Capital’s 27% stake entitles it to a RM252.72 million dividend windfall while Sinarmas’ 3.28% stake will see it getting RM30.7 million.
No big deal
However, the equity markets director said EWI’s dividends are primarily from its historical earnings.
“Companies pay out based on what they made over the years if they are in the financial position to do so, as long it is not a strain on the balance sheet,” he said.
“EcoWorld as a group has historically been fairly well run and prudent to a certain degree.
“There was obviously drama playing up on how much certain parties will be getting, but it has been sensationalised. Ultimately, these shareholders have been there from the start, so I don’t see what’s the big deal.”