http://propcafe.blogspot.my/2015/10/lee-tells-why-he-is-injecting-his.html

PUTRAJAYA: IOI Properties Group Bhd chairman Tan Sri Lee Shin Cheng justified the proposed injection of his private land into IOI Properties with a slew of reasons leading with him taking shares in the company which he described as an indication of the long-term value.

“I will only do this (getting most of the payment in shares) for a company I am controlling. The subject land to be injected, especially due to its location, has very good prospects and will enhance IOI Properties. My actions (of taking shares) clearly show that I am very confident in the future of my company. I will not sell the land to anyone else,” Lee told reporters after the IOI Properties’ AGM.

Last week IOI Properties announced it was buying 400 acres from Lee and his family for RM1.58bil in cash and new shares, a transaction that would need the approval of minority shareholders of the company as it was a related party transaction.

The deal is funded 74% by shares which are priced at RM2.21. The cash portion of the deal works out to some RM158mil. The deal will see Lee’s indirect stake in the company increasing to 58.56% from 51.47% currently.

When asked what he would do with the cash, Lee said: “I’ll use the money to buy some more shares in my company.”

The seasoned planter further justified the transaction by explaining that the land bank has been converted, 24% of which has already received the development order and that the development expenses can be covered by the company.

“Part of the land can either be developed immediately upon completion of the deal. No further loan is required as our revenue is enough to cover the expenses of developing the new land,” said Lee.

The landbank is housed under Mayang Development Sdn Bhd (MDSB) and Nusa Properties Sdn Bhd (NPSB).

The landbank is located within IOI City Resort and is strategically fronting the entrance of Putrajaya next to the South Klang Valley Expressway. The land is said to have a combined gross development value of RM20bil.

Based on the injection price of RM1.58bil, the landbank translates into roughly RM110 per sq ft (psf).

“The land is being injected at about 25% below the market price of land in that area, which I feel is very fair. So far, most analysts are favourable towards this deal,” said Lee.

Jones Lang Wootton has appraised the land under MDSB and NPSB and has ascribed a valuation of RM2.06bil for the MDSB land and RM440.1mil for the NPSB land.

“I bought the land donkey years ago when it was agricultural jungle. It was then known as Bukit Bisa because there were a lot of snakes and nobody dared enter the land. Only I dared enter the land,” said Lee.

In purchasing the land, IOI Properties’ net borrowings will increase from RM889.37mil as of June 30, 2015 to RM1.46bil after the acquisition. Hence, net gearing will increase from 0.07 times to 0.1 times.

Meanwhile, IOI Properties is targeting total sales of RM2bil for its year ended June 30, 2016.

For financial year 2015, IOI Properties recorded a 31.08% increase in revenue to RM1.91bil while net profit increased marginally to RM890.7mil from RM889.92mil.

IOI Properties chief executive officer Lee Yeow Seng, who is the son of Lee, said the RM2bil would come from its projects in Malaysia, China and Singapore. So far, its Xiamen City project has contributed 1 billion yuan (RM666mil) in sales.

Yeow Seng expects Singapore to contribute some RM200mil in sales.

On the outlook of the property market, Lee said that the next peak would be higher than the current peak in terms of pricing.

“The price of everything has gone up. Land cost, labour and building materials. We are now in the tail end of the current property cycle. Property prices may start to go up in the next quarter,” he said.