- According to news reports, IOI Properties Bhd will be seeking a relisting on the main market of Bursa Malaysia in September 2013.

- To reward shareholders, not less than half of IOI Prop’s RM15bil asset value will be given back to shareholders in the form of a dividend-in-specie. It was reported that based on IOI Corp’s 6.4bil shares, this would work out to be more than RM1.20/share.

- According to the same report, IOI Corp’s shareholders will be getting more than 50% of their shares in IOI Properties for free. This is because a property company typically trades at a discount to its book value. The demerger exercise will entail a renounceable rights issue where existing shareholders who subscribe to the rights exercise will not be diluted.

- If the above report is true, then we believe that the dividend-in-specie may provide a shortterm kicker to IOI’s share price. Based on 2014F earnings and PE, we value IOI’s property division at RM7.3bil.

- IOI is currently trading at an FY14F PE of 17x according to consensus estimates whereas property companies like Mah Sing and IJM Land are presently trading at 2014F PEs of 10x-12x.

- For enhancement in shareholders’ value, the listing of the property subsidiary should be carried out at a higher PE versus the holding company’s valuation. However, due to market conditions, this would not be likely. In FY12, IOI’s property development division recorded an EBIT of RM451mil. Share of profits in the property joint ventures in Singapore were about RM32.7mil.

- Some of IOI’s property projects in Malaysia, which have high gross development values (GDV) are 16 Sierra (GDV=RM2.8bil), Bandar Putra Kulai (GDV=RM8.7bil) and a few launches in Bandar Puteri. Apart from these, IOI is in the process of developing IOI City Mall at IOI Putrajaya, which is estimated to cost between RM500mil and RM1bil.

- IOI has started construction of its first property project in Xiamen, China. The condominium project is estimated to command a GDV of RMB1bil. The project is expected to be launched this year. In Singapore, the two projects, which have received positive response, are Cityscape and Jalan Lempeng. Take-up rate for Cityscape is between 85% and 90% while IOI has sold about 100 units of the condominium project at Jalan Lempeng.

Source: AmeSecurities