IOI PROPERTIES GROUP BERHAD - Bursa Malaysia Property IPOs

The stock opened at 3.21 ringgit ($0.98) on Bursa Malaysia, against an initial public offering price of MYR2.51

http://klse.i3investor.com/servlets/stk/5249.jsp

 http://www.bursamalaysia.com/market/listed-companies/company-announcements/1514321

Initial Public Offering (IPO)

 Bursa Malaysia

Company Announcements

IOI PROPERTIES GROUP BERHAD

Largest listed developer by landbank and second largest by market cap. The group owns a remaining landbank of 14,337 ac, which includes lands located in Johor, Klang Valley, Melaka, Negeri Sembilan and Penang while its overseas exposures includes Xiamen, China and Singapore. With its market cap of RM8.1b, IOIPG is the second largest listed developer in Malaysia by market cap, meaning high visibility, as well as premium valuations. There is also a high likelihood that the stock may qualify as a Shariah compliant counter in the next Jun-2014 review.
 
Deep value in terms of GDV/market cap ratio. We estimate a total GDV of c.RM100b for IOIPG, which puts it on par with SPSETIA and 28% higher than UEMS. This implies GDV/market cap ratio of 12.6x, just trailing behind SPSETIA, which has the best ratio of 14.3x but more than its big-cap peers’ average of 9.3x. If IOIPG trades at its big-cap peers’ average, its implied market cap would be RM11.0b or 35% higher than its IPO market cap.
 
Resilient demand from townships exposure. In Malaysia, the group’s main drivers are its townships (e.g. Bandar Puteri@Puchong, 16 Sierra @ South Puchong, Bandar Putra Kulai @ Kulaijaya). These townships are mainly focused on landed residentials with strong accessibility to rail systems and highways. Their markets tend to focus on genuine owner-occupiers in the affordable and upgraders market, which should see resilient demand even during tough market cycles. Their biggest overseas contributor over the next few years will be IOI Park Bay, Xiamen, China, which has achieved 100% take-up rate for Phase 1 (GDV: RM400m).
 
Working less for each ringgit earned. IOIPG has enjoyed strong gross profit margin of 57%-61% over the last 3 years vs. its peers’ 18%-40%. This is attributable to its lower landbank costs, coupled with strong and reputable branding, which allows the group to price its product at a premium.
 
Building a war chest of investment properties. At IPO, IOIPG is in a very comfortable net gearing level of 0.05x with no immediate need to acquire more land given its ample war chest of land, which should sustain the company beyond 10 years. However, the group willexpand its investment properties for more recurring income and we estimate that they will spend RM2.5b CAPEX over the next two years while FY14-15E net gearings will remain below the healthy 0.2x mark. There is a possibility that the company may explore monetisation of their investment properties in the future.
 
Estimating FY14-15E core earnings of RM0.72b-RM0.81b (33%-12% YoY). This is based on sales assumptions of RM2.6b-RM3.1b (52%-21% YoY) vs. management’s guidance of RM2.5b-RM3.0b p.a. for the next 3 years which implies very low take-up rates of 42%-50% against its 3-year launch target of RM18b (56% Malaysia; 28% Xiamen, China; 16% Singapore).
Source: KNKenanga Research

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