• IOI Corporation announced that it has sold 10% of Bunge Loders Croklaan to Bunge Ltd for US$84.4mil and €19.7mil (RM466.1mil in total).

• The proposed disposal was provided for in the shareholders’ agreement between Bunge and IOI in 2018 (pursuant to the disposal of 70% of Loders Croklaan to Bunge).

• After the proposed disposal, IOI’s shareholding in Bunge Loders will decline to 20% from 30%.

• The estimated loss from the disposal is RM50mil. This is mainly due to fair value loss from the de-recognition of the put and call Options.

• The loss on disposal would reduce IOI’s FY23F net profit by 4%. Operationally, there is minimal impact from the smaller recognition of Bunge Loders’ earnings contribution at the new shareholding of 20% vs. 30% previously.

• Bunge Loders’ earnings are recognised under share of net profit in associates. IOI’s other associates are Bumitama Agri and Kao Corporation.

• We estimate IOI’s share of net profit in the manufacturing associates (Bunge Loders and Kao) to be a negative RM19.2mil in 9MFY22 as Bunge Loders suffered impairment losses.

• The disposal consideration of RM466.1mil values Bunge Loders at RM4.7bil. This is slightly lower than IOI’s sale of 70% of Loders Croklaan to Bunge in FY18, which valued Loders at RM4.9bil.

• We maintain HOLD on IOI with a fair value of RM3.30/share based on a FY23F PE of 18x and a neutral ESG scoring of 3 stars.

Source: AmInvest Research - 8 Aug 2022