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Monday, February 13, 2012

IOI mulls relisting of arm

PETALING JAYA: IOI Corp Bhd is mulling a relisting of its property arm that would see the group unlock values in that segment and enhance the attractiveness of the parent company to investors as a more plantation-focused company, according to reliable sources.

“The group is in discussion with two investment banks on this to get feedback, especially on the right timing of the exercise,” said a source.

Analysts said the relisting of its property division would increase the stature of IOI Corp as a pure plantation play which would likely have higher valuations.

“It will reduce the conglomerate discount and transform IOI Corp into a pure plantation play, with a controlling stake in a valuable property company IOI Properties. Sole industry companies usually tend to fetch higher valuations,” an analyst with a local bank-backed research house said.

IOI Corp may wish to also time the relisting of its property arm in line with a more bullish view on the property sector.

In a sales note to its clients issued in January, Maybank IB said that potential downsides had already been priced into the property sector and that it did not discount the possibility of raising its call on the property sector from “neutral” to “overweight” in the medium to longer term as developers today were “backed by considerable unbilled sales, providing near-term earnings visibility.”

IOI Corp had privatised its arm in 2009. Then known as IOI Properties Bhd, IOI Corp had on Februuary 2009 launched a takeover offer at RM2.60 per share.

The takeover was successful and IOI Properties was subsequently delisted on April 28, 2009. It is today wholly-owned by IOI Corp. IOI Corp has been actively growing its property business since.

In January it acquired six acres of land in Singapore for RM995.5mil to build high-end condominums and will have to settle the entire amount to the government of Singapore within 90 days from the date of the tender acceptance letter.

Presently, it has seven projects which it is developing locally with estimated gross development values (GDVs) of almost RM20bil.

Properties can testify to its track record in building property projects that have sold well. Excluding the latest land buy in Singapore, it is also presently developing high-end projects in the southern neighbouring island state with GDVs close to RM6bil.

IOI Properties has completed property development projects in Puchong, Putrajaya, southern Johor and Singapore before.

Meanwhile, banking sources also said that IOI Corp was in talks with banks to raise more funds.

“It is in a good position to do so, considering its huge cash flows from its plantation side of the business,” said one banker.

The funds raised should give IOI Corp sufficient funds to not only pay for the Singapore land acquisition but also ready funds in the event it chooses to buy more assets such as plantation land.

Based on its results for the first quarter ended Sept 30, 2011, IOI Corp had total short and long-term borrowings of RM688.24mil and RM4.87bil respectively. Most of these debts are denominated in the US dollar, the Singapore dollar and the yen.

IOI Corp had cash and cash equivalents of RM3.22bil as at Sept 30, 2011.

By The Star

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