IOI still a favourite for investors


By JAGDEV SINGH SIDHU

IOI Corp Bhd has been a firm favourite among institutional funds for a long time. Investors usually cite the management's strength and solid core of businesses as reasons for owning a slice of the company. 

“It is well-managed, it has expanded and it is in an industry where Malaysia has a comparative advantage,'' said K&N Kenanga head of research Seow Choong Liang. 

IOI Corp's rise over the years has been steady and stellar. Assuming an investor had bought one share on the last trading day of 1989 and subscribed to the company's rights and warrants issue, his investment would have grown nearly five times over the past 13 years, compared with a return of slightly more than two times if the money had been put in a fixed deposit account. 

“It is a great company in a great sector. To grow like IOI has takes management, operational and financial acumen,” said Seow. 

The company was listed on the KLSE on July 29, 1980. Tan Sri Lee Shin Cheng took control of the company in December 1982 and has been acquiring oil palm plantations ever since. 

In June 1985, the company acquired 27,000ha of plantation land in Sabah, and in September 1990, it acquired the entire fixed assets of Dunlop Estates Bhd, including 12 estates covering 27,880 ha. 

“Dunlop Estates was one of the oldest plantation estates in Malaysia and being the oldest, its plantations were near big and small towns where labour was available,'' said Seow. 

In 1994, IOI Corp, in a restructuring and rationalisation exercise, acquired a controlling interest in IOI Properties Bhd (formerly Lam Soon Huat Development Bhd). 

In March 1997, IOI Corp took control of Palmco Holdings Bhd by acquiring a 32.9% stake in the company. That stake has been bumped up to 52% today after a corporate tussle with Sime Darby Bhd for control of Palmco. 

“IOI Corp has generated strong institutional investor interest by being focused, and focusing, on returns and shareholder value,'' said ING Financial Markets senior analyst Uday Jayaram. 

“Gaining a strong institutional shareholder base is important because they are long-term shareholders.'' 

Last year, IOI Corp bought Loders Croklaan for RM820mil and subsidiary Palmco bought Unilever's palm oil plantations in Sabah for RM567mil. With the acquisition by Palmco, the group's plantations now total 120,000ha. 

Even though IOI Corp is still called a plantation-based company, analysts point out that the group's earnings base is now diversified into three main segments – plantations, properties and manufacturing (through Palmco and Loders). 

“Its earnings profile is much more stable and the cyclical nature of its earnings has diminished,'' Said Uday. 

Analysts feel that the IOI Group would now put its acquisition spree on hold and concentrate on growing the businesses it has acquired over the past two years. 

This, they say, should not be taken as a sign that IOI Corp has matured. 

“There is still room for it to grow,'' said Uday. 

Seow, too, concurred, saying that IOI Corp's growth record can continue. 

“It can attain growth with its strong cashflow. This company is in a long-term growth phase,'' said Seow. 

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