• IOIPG announced that the group is not pursuing the proposed acquisition of 37.2% stake in Taipei 101.

• According to the announcement, the three months period to obtain foreign investment approval from the Foreign Investment Commission (FIA) of Taiwan has expired and IOIPG does not intend for any period extension. As such, the share sale agreement (SSA) is terminated and the group will now proceed to obtain the refund of the deposit paid.

• Recall that the group proposed the acquisition of Taipei 101 on 5 Dec 2014 for approximately NT$25.14bn or RM2.74bn.

Comments

• We are neutral on the announcement as we have not imputed any potential contribution from the proposed acquisition.

• Furthermore, several concerns were raised upon announcement of the acquisition and was opposed by Taiwan’s Finance Minister Chang Sheng-ford.

• Post-termination of the SSA, IOIPG would be refunded the deposit (10% of the purchase consideration) which amounted to approximately RM274m.

• This would then lower the group’s net gearing position by 11% from 0.19x to 0.16x. This would then allow more room for borrowings (approximately RM4bn) should the group intend to pursue any potential acquisitions and/or landbanking activities going forward before hitting the general rule-of-thumb maximum level of 0.50x.

Risks

• 28% exposure to China and Singapore in terms of GDV, making it sensitive to any external slowdown and forex fluctuations.

Forecasts

• Maintained.

Rating

HOLD

Positives

• : Highly liquid proxy to property sector; largewar-chest for landbank acquisitions; has exposure to Singapore and China property markets; enjoys vast and cheap landbank.

Negatives

• : Could face sector headwinds in Malaysia,while the Singapore and China property markets are also currently at the low point of their cycles.

Valuation

• TP remained unchanged at RM2.27 based on unchanged 35% discount to RNAV. Our TP of RM2.27 valued IOIPG at 18.9x FY15 P/E.

Maintain HOLD.

Source: Hong Leong Investment Bank Research - 9 Mar 2015