KUALA LUMPUR: The demerger and listing of IOI Corp Bhd’s property unit look set to create the largest developer on Bursa Malaysia in terms of market capitalisation.

Upon its listing planned for the end of this year on the local bourse, the new listed entity, IOI Properties Group Sdn Bhd (IOIPG), is expected to have a market capitalisation of RM14.66 billion, surpassing UEM Land Holdings Bhd’s RM13.8 billion based on the latter’s closing price yesterday.

IOI Corp yesterday announced a demerger exercise whereby it will inject its property assets and related subsidiaries at RM12.68 billion into IOIPG while at the same time, capitalising RM1.8 billion of inter-company debt into equity in IOIPG.

Together with the injection of RM196 million worth of family-owned assets by IOI Corp’s major shareholder — the Lee family, into IOIPG, the total consideration works out to RM14.67 billion, to be satisfied by the issue of 3.287 billion IOIPG shares at RM4.46 per share.

About 2.16 billion IOIPG shares will be distributed to IOI Corp shareholders for free, on the basis of one IOIPG share for every three IOI Corp shares held.

Meanwhile, under a restricted offer for sale (ROS), 1.08 billion
IOIPG shares will be offered for sale to IOI Corp shareholders on the basis of one IOIPG share for every six IOI Corp shares held.

The exercise confirms a recent report by The Edge stating that the listing of IOI Corp’s property unit would be implemented through a demerger.

According to IOI Corp, independent valuers have appraised the market value of the assets and subsidiaries to be injected into IOIPG at a whopping RM18.5 billion.

“The proposed demerger of the property-related business from IOI Corp has excited the property sector and has been deemed a catalyst for the sector due to our asset size of RM18.5 billion. It also has international exposure,” said IOI Corp group executive chairman Tan Sri Lee Shin Cheng at a briefing yesterday.

“The proposed listing on Bursa will be one of the biggest for listed property companies in the country,” Lee added.

It is worth noting that the proposed offer price for the ROS will be up to approximately 30% discount to reference price and is expected to raise about RM1.9 billion, of which RM1.8 billion will be used to pare down the borrowings of IOI Corp.  

Lee will underwrite IOIPG shares which are not subscribed by shareholders under the ROS.

“The main objective is to provide IOI Corp shareholders an opportunity to unlock their value between the currently listed plantation and resource-based manufacturing businesses with the soon-to-be-listed property-related businesses.

“Plantation companies normally trade at a higher PE [price-earnings] ratio, compared to property companies. Right now, property companies trade at a PE of 10 to 13 times. So, we want to see IOIPG’s PE trade closer to IOI Corp’s PE in the near future because we have strategic location landbank in Malaysia and overseas,” Lee added.

The group executive chairman is expecting not less than RM1 billion in annual operating profit from the new listed entity in the next three years, adding that earnings contribution would come not only from Malaysia but also from Singapore and China.

In the financial year ended June 30 last year, IOI Corp’s property division recorded an operating profit of RM506.3 million.

“We expect earnings from Malaysia and overseas to be even, on a 50:50 ratio in the next three years”, Lee said, adding that in the next five years, property development will account for 60% of contribution, while the remaining 40% will come from property investment. Lee also said the current 4,070ha of its landbank are located in ideal locations in Malaysia and China, and they will make development commercially viable in the next 15 years.

As for the candidate who will take on the CEO position in the new listed company, Lee remained mum on the names. But, Lee said he will continue to lead both entities as chairman.

The exercise is jointly advised by AmInvestment Bank Bhd and RHB Investment Bank Bhd.