Albert Chang
KUALA LUMPUR: Shareholders of Zelan Holdings can look forward to higher dividends when the group starts investing this year in foreign independent power producers (IPPs) that generate recurring income. Chief executive officer Albert Chang said the power plant specialist was targeting to invest RM2bil worth of equity in foreign IPPs by 2010. He said the group was in talks with IPPs in India, Indonesia and the Middle East.
“We expect this (buying a stake in foreign IPPs) to happen this year,” he said after the signing of a US$169mil syndicated contract financing package between Zelan and OCBC Bank (M) Bhd yesterday.
The group, Chang said, expected its investments in IPPs to yield an internal rate of return of between 12% and 16%. The recurring income from the IPPs would allow Zelan to raise its dividend payout to 50% of its profit each year, he added.
The ideal investment size in IPPs was about 15% to 30% equity interest, he said, adding that taking up a controlling stake required huge capital, which might affect the cash available to pay dividends.
Zelan declared a dividend per share of 15 sen for the financial year ended Jan 31 this year.
On the company's investment strategy, Chang said Zelan preferred to participate in the greenfield projects that it was involved in constructing. Zelan is sitting on a cash pile of about RM280mil after disposing of part of its stake in construction-based IJM Corp Bhd. Its net cash per share rose to 99.7 sen after the share sale from 66.3 sen previously.
Chang said the sales proceeds would come in handy for the group's investments in IPPs.
He confirmed that Zelan would continue to trim its interest in IJM, which currently stood at 9.67%.
The group’s shareholding in IJM shrank after the latter made a general offer to acquire Road Builder (M) Holdings Bhd last year via a share swap. This resulted in Zelan being unable to book in its share of IJM’s profits although it could still receive the dividends paid out by the latter.
Its equity interest in IJM is worth about RM660mil based on the counter's closing price of RM8.10 yesterday.
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