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This article first appeared in The Edge Malaysia Weekly on November 26, 2018 - December 2, 2018

MARKET talk has it that there could be a corporate exercise brewing at property counter IOI Properties Group Bhd.

While details are scarce, the market scuttlebutt has it that Maybank Investment Bank Bhd is playing a key role in the exercise.

“It (the corporate exercise) has been brewing for some time now, and with the current damp sentiment weighing down the property market, it makes sense,” one of the sources says.

Sources at Maybank contacted by The Edge declined to comment.

IOI Properties’ share price hit a multiple-­year low of RM1.21 on Oct 21, but has since rebounded by more than 30%, buoyed by higher trading volume, and closed at RM1.65 last Thursday. This translates into a market capitalisation of RM9.08 billion.

Property developers say unbilled sales are on the decline, but add that the situation is bearable and they are still registering decent earnings. The decline in unbilled sales, they say, is a result of the overall slowdown in the property market over the past few years.

Sales of residential properties have slipped  29% to 194,684 units last year, compared with 2012, when 272,669 units were sold, according to data from the National Property Information Centre.

IOI Prop’erties’ net asset per share as at end-June was RM3.33, which is more than double its current share price.

Its annual report indicates that the company has many choice properties in Malaysia and outside the country. These include an integrated mixed-use development in Singapore, which is still under construction, comprising office towers and a retail podium in Central Boulevard in the Marina Bay area, opposite Telok Ayer Market, which has a 99-year lease. The project was pegged with a carrying value of RM8.09 billion as at end-June this year. In China, it has two parcels of land totalling 20 acres in Xiang An District, Xiamen in Fujian Province with an ongoing mixed-use development with a carrying value of more than RM2 billion.

At home, it has 380 acres in total, including IOI Resort City, Putrajaya, and leasehold parcels in Dengkil, Sepang, Selangor, that expire between 2019 and 2113, with an ongoing mixed-use development. It also holds land for future development with a carrying value of RM1.83 billion and a four-storey mall and car park — IOI City Mall — in Putrajaya, with a carrying value of RM1.57 billion. In total, according to its annual report, IOI Properties has almost RM21 billion worth of land.

For its financial year ended June 2018 (FY2018), IOI Properties registered a net profit of RM783.63 million on revenue of RM2.79 billion. Compared with a year ago, net profit was down almost 15% while sales fell by a third.

In its notes accompanying its financials, IOI Properties says, “With the group’s sizeable land bank in strategic locations in Malaysia and overseas, coupled with a strong track record in delivery, the group is well-positioned to adapt to market conditions in Malaysia and overseas. Barring any unforeseen circumstances, the group is expected to continue to deliver a satisfactory performance in the coming quarter.”

As at end-June this year, IOI Properties had deposits with financial institutions amounting to RM1.84 billion, cash and bank balances of RM547.59 million and short-term funds of RM298.12 million, or RM2.68 billion in total. Short and long-term borrowings, meanwhile, stood at RM2.4 billion and RM9.57 billion respectively.

Considering IOI Properties’ share base of 5.51 billion shares, this RM2.68 billion kitty works out to 48.6 sen per share.

It is also worth noting that IOI Properties’ largest shareholder is 79-year-old Tan Sri Lee Shin Ching, who directly and with his wife and children controls 64.94% or 3.57 billion shares in the company. In May this year, he had a 64.06% stake or 3.53 billion shares.

The only other substantial shareholder in IOI Properties is the Employees Provident Fund, which has 6.66% equity interest. Other notable shareholders as at end-August included various funds under Permodalan Nasional Bhd, with 6.3%.

It is also interesting to note that when IOI Properties’ shares were floated on Bursa Malaysia in January 2014, it was via the distribution of 2.13 billion shares to IOI Corp Bhd shareholders on the basis of one IOI Properties share for every three IOI Corp shares held, and an offer for sale of 1.06 billion IOI Properties shares to the shareholders of IOI Corp on the basis of one share for every six held in IOI Corp, at an offer price of RM1.76, which raised RM1.87 billion for the selling shareholder, IOI Corp.

Back in 2009, IOI Properties Bhd was privatised after IOI Corp offered to acquire all the 199.73 million shares in IOI Properties it did not already own for RM2.598 apiece, paid in IOI Corp stock and cash.

IOI Corp forked out 33 sen per IOI Properties share, and 0.6 of a share in IOI Corp, which was valued at RM3.78. The total deal valued IOI Properties at RM518.9 million.

As part of IOI Corp, the property arm expanded aggressively both locally and overseas.

 

 

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