PUTRAJAYA (Oct 30, 2013): IOI Corp Bhd is due to spin off its lucrative property arm IOI Properties Group Bhd and list it on the Main Market of Bursa Malaysia in January next year, with a market capitalisation of more than RM14 billion, said IOI Corp executive chairman and plantation tycoon Tan Sri Lee Shin Cheng (pix).
The initial public offering (IPO) is slightly off its initial timeframe of end-2013.
"IOI Properties will probably be listed in the first month of next year. The listing preparations are going smoothly as we are now waiting for the final approval from High Court. To date, the Securities Commission and Bursa Malaysia have given (IOI Properties IPO) the green light," Lee told a press conference after IOI Corp's EGM here yesterday.
At the meeting, shareholders gave IOI Corp the go-ahead to the demerger of IOI Properties.
Lee is expecting not less than RM1 billion in annual net profit from IOI Properties in the next three years.
"I presume the price to earnings (P/E) ratio of IOI Properties will not trade at less than 14 times (against its listed industry peers of 13 times to 15 times). Being a reputable company which has been doing very well, IOI Properties' market capitalisation should fetch more than RM14 billion upon listing," said Lee.
While the market capitalisation of IOI Corp will be slightly affected after the demerger of its property unit as its share price will be technically adjusted to RM4.42 from its closing price of RM5.44 yesterday, Lee said he is not too concerned about it.
On the recent revision of the real property gains tax (RPGT) rates and the increased threshold of RM1 million for foreign buyers announced in Budget 2014, Lee said the industry as a whole may see a slow down in property sales in the next one to two months as a knee-jerk reaction to the moves.
Lee said IOI Properties, however, will largely be protected from these measures as most of its buyers are owner-occupiers.
IOI Properties currently owns some 10,000 acres of land bank, with 95% in Malaysia and the rest in Singapore and China.
Lee said the group targets at least 10 new launches a year.
Earlier at the meeting, IOI Corp shareholders also agreed for IOI Properties to buy the remaining 10% stake in Property Village Bhd and Property Skyline Sdn Bhd each from Summervest Sdn Bhd, which is controlled by Lee for RM196 million.
Distribution-in-specie would be given on the basis of one IOI Properties share for every three shares held in IOI Corp.
Lee said the group's shareholders are happy to own shares in two separate entities, which are both listed on Bursa Malaysia.
"IOI Corp used to distribute 50% of its net profit as dividend. Hopefully, IOI Properties will follow (suit)," he said. The plantation and downstream divisions currently contribute 65% to the group's profit and the remaining comes from its property business.
Post-distribution, a non-renounceable restricted offer for sale of all remaining shares in IOI Properties will be opened to IOI Corp shareholders on the basis of one IOI Properties share for every six IOI Corp shares.
From the offer for sale of up to 1.08 billion shares, Lee said the group will receive proceeds of at least RM1.9 billion which will be utilised to redeem its bond, to repay its loans amounting to US$500 million (RM1.5 billion) and the rest for working capital.
IOI Corp's net cash position currently stands at more than RM2 billion.
Following the completion of its acquisition of Unico-Desa Plantations Bhd and the demerger of its property arm, Lee expects IOI Corp to generate an annual revenue of RM11 billion to RM12 billion, with net profit coming in at not less than RM1.5 billion a year.
Unico-Desa is expected to contribute some 8% to 10% to the group's revenue going forward, said Lee.
On crude palm oil, Lee expects prices to increase from the current level of about RM2,500 per tonne by year-end, and exceed the RM3,000 per tonne mark should the palm oil biodiesel blends increase.