PETALING JAYA: IOI Properties Group Bhd
’s (IOIProp) recent acquisition of the remaining 50.1% stake in Singapore’s South Beach development signals a pivotal moment in its long-term growth trajectory, potentially narrowing the discount at which its shares currently trade.
Hong Leong Investment Bank Research (HLIB Research), in a note issued following a recent meeting with IOIProp’s group chief executive Lee Yeow Seng, described the acquisition as strategically compelling, providing greater clarity on the group’s long-term direction.
“The meeting with management reinforces our positive stance on the South Beach acquisition and provides greater clarity on the group’s long-term strategic direction,” HLIB Research said.
The research house said the South Beach deal was “strategically compelling for several reasons”, including IOIProp’s deep familiarity with the asset, given its involvement from the outset as part of the original development consortium.
HLIB Research highlighted that “these are prime, mature, and income-generating assets, which significantly reduce location risk and operational uncertainties typically associated with greenfield developments”.
Lee indicated that full ownership would enable IOIProp to unlock value creation opportunities.
“Gaining full control allows IOIProp full discretion to optimise operations, unlock synergies, and accelerate monetisation strategies,” HLIB Research said.
The South Beach asset’s stable cash flows and prime location also make it well-positioned to anchor the group’s planned asset monetisation exercise via a Singapore real estate investment trust (REIT) listing.
The acquisition is to be funded through bank borrowings and bonds (potentially sukuk) to maintain syariah compliance, with no rights issue planned.
Post-acquisition, IOIProp’s net gearing could rise to around 0.93 times. Addressing concerns, management outlined three mitigating factors to manage net gearing: the imminent launch of W Residences Marina View in Singapore, the planned Malaysia REIT listing by mid-2026, and the Singapore REIT listing in 2027.
“Importantly, it also addresses several key investor concerns, particularly on its plan to gradually reduce net gearing, and IOIProp’s commitment to maintaining its syariah-compliant status,” HLIB Research said,
The group also has a potential acquisition in the pipeline involving the Shenton House business centre in Singapore, currently held under Lee’s private capacity, providing flexibility to time payments and align with the group’s financial strategy.
“We believe that IOIProp’s stock is significantly undervalued as it is trading at only 0.44 times of its book value,” the research house said
Investors, it argued, are effectively gaining exposure to high-quality assets –including IOI City Mall in Selangor and IOI Central Boulevard in Singapore – at a steep discount.
“Nonetheless, we expect this valuation gap to narrow considerably in the near term as key assets such as IOI Central Boulevard and W Residences Marina View are approaching their inflection point,” HLIB Research said.
It maintained its “buy” recommendation on the stock with an unchanged target price of RM4.05.
“IOIProp offers investors rare diversified market exposure, anchored by its strategic presence in Singapore’s resilient and high-value real estate market, alongside a deep-rooted position in Malaysia’s property sector,” the research house said.
