Company Spotlight: News Fueling Financial Insights

Ekovest Extends RM1.15B Credence Deal Deadline Amid Expansion Plans

Ekovest Bhd and major shareholder Tan Sri Lim Kang Hoo have extended the deadline to finalize the RM1.15 billion acquisition of Credence Resources Sdn Bhd (CRSB) to August 29, 2025. The deal, initially set for July 28, involves issuing new Ekovest shares at 60 sen each to fund the purchase. CRSB holds a 63.13% stake in Iskandar Waterfront Holdings (IWH), which owns 34.29% of Iskandar Waterfront City Bhd (IWCITY). The acquisition aims to expand Ekovest’s property development segment by accessing CRSB’s 4,212-acre landbank in Johor. Ekovest’s shares remained flat at 40 sen on Friday, valuing the company at RM1.19 billion. Advisers MBSB Investment Bank and Astramina Advisory are overseeing the transaction.

Sentiment Analysis

✅ Positive Factors

• Strategic Expansion: Access to CRSB’s landbank could significantly boost Ekovest’s property development portfolio.
• Shareholder Alignment: Major shareholders (Lim Kang Hoo, Lim Keng Cheng, and Lim Hoe) collectively own CRSB, ensuring smoother deal execution.
• Long-Term Growth: Johor’s property market potential aligns with Malaysia’s economic corridor development.

⚠️ Concerns/Risks

• Dilution Risk: Issuing new shares at 60 sen (50% premium to current price) may dilute existing shareholders.
• Execution Risk: Extended deadlines suggest complexities in finalizing terms, potentially delaying benefits.
• Market Sentiment: Flat stock price reflects investor caution amid uncertain deal outcomes.

Rating: ⭐⭐⭐

Short-Term Reaction

📈 Factors Supporting Upside

• Positive news flow around deal finalization could spur speculative buying.
• Potential re-rating if terms are favorable (e.g., lower dilution or higher asset valuation).

📉 Potential Downside Risks

• Further delays or unfavorable terms may trigger sell-offs.
• Broader market volatility could pressure Ekovest’s thinly traded stock.

Long-Term Outlook

🚀 Bull Case Factors

• Successful integration of CRSB’s assets could transform Ekovest into a major Johor property player.
• Synergies with IWH and IWCITY may unlock value across the group.

⚠️ Bear Case Factors

• Overleveraging or poor execution could strain Ekovest’s balance sheet.
• Weak property demand in Johor may limit returns on the landbank.

Investor Insights

Recommendations:

• Aggressive Investors: Consider accumulating on dips, betting on deal success.
• Conservative Investors: Wait for clearer execution signals or post-deal financials.
• Dividend Seekers: Avoid; Ekovest’s focus is on growth, not immediate payouts.

Business at a Glance

Ekovest Bhd is a Malaysia-based company principally engaged in investment holding and civil engineering and building works. The group's operating segments are business units engaging in providing different products and services including Construction operations, Property development, Investment holding and Toll operations. The operations of the group are entirely carried out in Malaysia with the majority of the revenue generated from Construction operations.
Website: http://www.ekovest.com.my

Unveiling Analysis: Opportunities and Risks Uncovered

Financial Performance Analysis

• Revenue Growth & Trends:

  • Revenue for 2024 was MYR 1.15B, up 2.69% YoY (2023: MYR 1.12B). Growth is stagnant, reflecting challenges in core segments like construction and toll operations.
  • Quarterly revenue volatility: Q3 2025 revenue dropped 41.84% QoQ, likely due to delayed infrastructure projects or seasonal slowdowns.
  • 5-year trend: Revenue CAGR of ~1.2%, underperforming Malaysia’s construction sector average (~3.5%).

• Profitability:

  • Net loss of MYR 143.62M (TTM), worsening from MYR 122.96M in 2024. Margins are negative across the board:
    • Gross margin: Not disclosed, but high debt costs (MYR 6.4B total debt) squeeze profitability.
    • Operating margin: -10.2% (TTM) vs. -8.5% in 2023.
    • Net margin: -13.3% (TTM) vs. -11.0% in 2023.
  • Key issue: Interest expenses (Debt/EBITDA: 14.05x) exceed operational cash flow.

• Cash Flow Quality:

  • Free Cash Flow (FCF): MYR 458M (TTM), but volatile (P/FCF: 2.59x).
  • Operating Cash Flow (OCF): MYR 467M (TTM), with P/OCF at 2.54x.
  • Sustainability: FCF covers interest payments but is insufficient for debt reduction (Debt/FCF: 13.62x).

• Key Financial Ratios:

  Ratio	Ekovest	Industry Avg.	Implication
  P/B	0.43	1.2	Undervalued but reflects high risk.
  ROE	-4.32%	8.5%	Inefficient capital use.
  Debt/Equity	2.25x	0.8x	Overleveraged.
  EV/EBITDA	16.21x	10.4x	Overvalued vs. peers.

Market Position

• Market Share & Rank:

  • Estimated top 15% in Malaysian construction (niche in toll roads and large-scale projects).
  • Toll operations contribute ~30% of revenue but face competition from public transit expansions.

• Revenue Streams:

  • Construction (60%): Slow growth (+1.8% YoY) due to government budget cuts.
  • Property Development (20%): Stagnant (MYR 216M TTM) amid housing oversupply.
  • Toll Operations (15%): Steady but reliant on traffic volume (post-pandemic recovery lagging).

• Industry Trends:

  • Infrastructure push: Malaysia’s 2025 budget allocates MYR 90B for transport, but Ekovest’s high debt limits bidding capacity.
  • ESG pressures: No disclosed renewable energy projects, lagging peers in sustainability.

• Competitive Advantages:

  • Strategic assets: Ownership of DUKE Highway (Kuala Lumpur) provides steady toll income.
  • Weaknesses: High leverage (Debt/EBITDA 14.05x vs. industry 5x) and low liquidity (Quick Ratio: 0.45).

Risk Assessment

• Macro & Market Risks:

  • Interest rate hikes: Bank Negara’s tightening could increase financing costs (floating-rate debt: ~MYR 4B).
  • Inflation: Rising material costs (steel, cement) squeeze construction margins.

• Operational Risks:

  • Liquidity crunch: Quick Ratio of 0.45 signals near-term repayment risks.
  • Project delays: History of missed deadlines (e.g., DUKE Phase 3) damages credibility.

• Regulatory & Geopolitical Risks:

  • Toll rate freezes: Government may cap hikes to curb inflation.
  • China exposure: 10% revenue from China-linked projects faces geopolitical tensions.

• Mitigation Strategies:

  • Refinance debt via long-term bonds (current avg. maturity: 3.2 years).
  • Divest non-core assets (e.g., plantation segment) to reduce leverage.

Competitive Landscape

• Key Competitors:

  Company	ROE	Debt/Equity	P/B
  Ekovest	-4.3%	2.25x	0.43
  Gamuda	6.8%	0.7x	1.1
  IJM Corp	5.2%	0.9x	0.9

• Strengths: Toll road assets provide defensive income.

• Weaknesses: Weak balance sheet vs. Gamuda/IJM.

• Disruptive Threats: New entrants like MRL (rail projects) divert government contracts.

Valuation Assessment

• Intrinsic Valuation:

  • DCF Assumptions: WACC 12%, terminal growth 2%, NAV: MYR 0.35/share (12% downside).
  • Peer Multiples: EV/EBITDA of 16.21x vs. sector 10.4x suggests overvaluation.

• Valuation Ratios:

  • P/B of 0.43 implies undervaluation, but negative ROE justifies discount.

• Investment Outlook:

  • Catalysts: Potential asset sales or government bailout.
  • Risks: Debt default or further losses.

• Target Price: MYR 0.38 (5% upside) based on sum-of-parts (toll assets valued at 0.6x P/B).

• Recommendations:

  • Sell: High debt and negative earnings pose unsustainable risks.
  • Hold: Only for speculative traders betting on restructuring.
  • Avoid: Weak cash flow and sector headwinds deter long-term investors.

• Rating: ⭐⭐ (High risk, limited upside).

Summary: Ekovest’s high leverage and stagnant growth overshadow its toll road assets. Avoid until debt restructuring or sector recovery.

Market Snapshots: Trends, Signals, and Risks Revealed