Mixed views on IOI unit demerger

  • Business
  • Thursday, 16 May 2013

PETALING JAYA: Analysts are both positive and neutral on the demerger of IOI Corp Bhd’s property arm.

Some are positive on the corporate exercise that involves the streamlining of its businesses as it would result in higher valuation of IOI Corp shares after revaluation and asset injection into IOI Properties Group Sdn Bhd (ListCo).

Those neutral on the development believe the potential of the relisting of ListCo has been priced in following the recent jump in IOI Corp’s share price.

Research houses like Hwang DBS Vickers Research, Hong Leong Investment Bank Research and Affin Investment Bank had upgraded the rating of the stock while others including Maybank IB Research, CIMB Research, RHB Research, Kenanga Research and PublicInvest Research maintained their calls.

In a note to investors, Hwang DBS Vickers Research said: “We view the proposed corporate exercise positively, as they not only unlock the unrealised market value of the group’s property assets, but also highlight the potential sources of growth for both the property and plantation businesses as separately listed entities.”

The brokerage also said the ListCo’s value had swelled to RM18.2bil with rising land prices and new land acquisitions including Singapore and Xiamen, China since its privatisation in 2009 for about RM1.8bil.

On the other hand, CIMB Research was positive on the proposal but neutral on IOI Corp’s share price upside.

The brokerage advised investors to subscribe to the restricted offer for sale (ROS) due to its attractive pricing of 30% discount on the final listing reference price and deduced that the potential listing reference price of ListCo would be around RM2.51 per share.

“We arrive at this by dividing the RM1.9bil proceeds from the ROS by the 1.08 billion total ListCo shares slated for this exercise.

“This works out to RM1.76 and represents roughly around 30% discount to the listing reference price stated in the announcement,” CIMB Research noted.

To recap, ListCo would issue 3.29 billion shares to IOI Corp at RM14.67bil or RM4.46 per share.

Entailing the floatation of ListCo, IOI Corp would distribute about 66% of ListCo shares to IOI Corp’s existing shareholders on the basis of one share for every three IOI Corp shares held and make a non-renounceable ROS of the remaining 33% of ListCo shares on the basis of one ListCo for every six IOI Corp shares held, at an offer price to be determined later.

Analysts are expecting ListCo’s offer price to range from RM1.76 to RM2.63.

Kenanga Research said: “We think that the purchase consideration price of RM4.46 per share is fair as it is at 19% discount to the market value of the appraised properties … in line with the average 20% discount attached to the realisable net asset value for property stocks under our coverage.”

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Business , IOI Corp , IOI Prop


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