On Star Business, a ghastly news was announced!
- Saturday April 13, 2013
Mixed views on IOI’s plan to re-list property division
PETALING JAYA: Analysts have mixed views on whether the possible re-listing of IOI Corp Bhd's property division would create value for it.
Early this week, a wire report had stated that IOI Corp was planning an initial public offering (IPO) of its property arm in the fourth quarter of 2013, speculating the total value of the listing to be in the region of RM10bil.
This would be a huge improvement in size, considering that it was only in 2009 that IOI Corp had bought back its then-listed property arm IOI Properties Bhd for a mere RM310mil in cash and shares, valuing the unit at about RM1.3bil.
“The plan to re-list its property arm is not new. In our sum-of-parts, we value the property business at close to RM9bil.
“We would be positive if the group lists its property arm, as it would allow it to unlock value and for investors to better appreciate its property division,” said a CIMB Research analyst.
She explained that at the moment, the property division was “hidden” and that there wasn't much visibility in terms of its value, future plans and launches in the pipeline.
“For now, no one knows what IOI Property is worth because it is hidden inside IOI Corp. With the listing, we would obtain more information. We would know a lot more about its launches and future developments.
“If it were to be listed on its own, then IOI Property would eventually be able to find its own value,” said the CIMB analyst.
An Alliance Research analyst pointed out that back in 2009, IOI Corp had taken IOI Properties private as the company was undervalued, trading at 8.4 times versus IOI Corp, which was trading at 15 times back then.
She said that as at IOI Corp's financial year ended June 30, 2012, the total asset value of the property development and investment segments stood at RM7.7bil, contributing a pre-tax profit of RM538mil or 20% of IOI Corp's total pre-tax profit.
“While details on the listing are not known, we have doubts whether the move would add value to IOI Corp, given the latter's rich valuations as compared to most property companies.
“This raises the issue of whether IOI Corp's property division's IPO could be priced at more attractive valuations than IOI Corp,” said the analyst.
She said that IOI Corp was currently trading at a forward price earnings of 20.7 times on 2013 earnings.
Another property analyst added that as IOI Property was currently 100% owned by IOI Corp, there was room for value creation.
“If it were to go for a separate listing, this would mean that the parent company sells down its stake and gets back some value from its assets.
“Perhaps, it could use that money to expand its business or give it back to shareholders,” said the analyst.
The analyst pointed out that a separate property listing would also reduce the risk for the plantations side.
This was because at present, funds from IOI Corp were being used to buy and develop land for its property segment.
Like I had said before, due to the fact that Bursa Malaysia is a listed BUSINESS entity, a relisting simply means a new IPO and new IPO means more business and I have no doubt that Bursa Malaysia would welcome this relisting with open arms.
I doubt that Bursa Malaysia would care about the minority shareholders who were mightly screwed when IOI Properties were delised back in 2009.
That ghastly and unreasonable privatisation is explained in detail in the posting:Why Is Retail Investing Lacking? (Part II)
- Now consider this story (the story of IOI Privatisation)
You read about the company venturing into another country, just when that country is announcing some interesting projects. You get optimistic about the company, right? Analysts are optimistic too.
So you invest in it.
Then came another opportunity.
Company announce a share split plus rights issue.
Rights issue can't be that bad, right? Especially when the company is now having hot new project in another country. Times are exciting and the company 'invites' you to invest more money into the company by subscribing to the rights issue.
So you decided to invest more, more so since you noted that the company was also buying back their own shares.
The company shares meanwhile started to announce weak set of earnings. Stocks started to decline.
7 months after you had subscribed to the rights issue, the stock, due to continued weak earnings, fell to its historical lows. The owners of the company too agree that the stock was cheap. So cheap that they decided to privatise it!
Now get this.
Your cost of shares after the rights issues was 6.25.
The company privatisation offer was a very generous 2.60!!!!!!!
Now do consider what was written on the Star Business today.
So previously, IOI saw IOI Properties was undervalued. Like a vulture, IOI capitalised on the cheap valuations by taking it private.
Did IOI care about its minority shareholders who had subsribed to the rights issue at 6.25 7 months earlier? My opinion is a simple NO since IOI privatisation offer was a generously ridiculous offer of 2.60!
And IOI even denied publicly the early privatisation rumours!!!!
Yeah, denied publicly but yet the company did the privatisation!!!
So when the subsidiary was considered cheap, it took it private.
Now to UNLOCK value, IOI Corp wants to relist it again!
Fair game for the minority investors???
You tell me!
Think about it.
Given such rampant delisting and relisting of companies, how is the stock exchange going to attract retail investors????
Yeah, don't cry if the market lacks retail investors!!!
Remember think about the GAME that it is being played.
When a stock is undervalued, careful... the stock could be delisted via a cheap privaisation offer.
And yeah, they will even dare to tell you it is unfair but hey, the offer is reasonable!!! (Duh!!!)
And now when they want to seak (unlock) value, they want to sell you the shares by relisting it once more!
You like such games?