News

• IOIPG has terminated the memorandum of agreement (MOA) with Hong Kong Land (HKL) on the proposed JV to develop its Central Boulevard land in Singapore due to the non-fulfilment of certain conditions precedent.

Highlights

• To recap, IOIPG has entered into the MOA with HKL back in June 2017 to jointly develop the land with HKL owning 33.0% stake in the JV co.

• The 2.7 acres of leasehold land was successfully tendered for SG$2.6bn (RM8.0bn) back in Nov 2016. Two office towers with 1.3m sqft NLA and a small retail podium of about 30.0k sqft NLA have been planned.

• We are negative on the news as we opine the JV with HKL would complement IOIPG well in the development given their wealth of experiences managing prime office assets and also ease the balance sheet burden of IOIPG in undertaking the entire project.

• Without the contribution from HKL, we expect IOIPG’s net gearing to be stretched and will inch up closer to 0.8x from the current 0.6x level with the estimated development cost in the region of SG$700m-800m.

• We understand that IOIPG is not looking for new partner at current juncture and they are confident to go ahead with the project on their own as per original plan given the expertise and capabilities of their own.

• On a positive note, relevant regulations and approvals have been attained for the plan while tender for the piling works has been awarded and construction has already commenced with target completion by 2021.

Forecast

• Unchanged.

Rating

BUY ↔ TP: RM2.50 ↔

• IOIPG is a value stock with huge land bank and investment properties on the back of attractive book value at 0.6x (industry average of 1.0x), reinforced by the improved take up rates for its projects and its strong track record.

Valuation

• Maintain BUY with unchanged TP of RM2.50 , based on unchanged 35% discount to RNAV of RM3.84.

Source: Hong Leong Investment Bank Research - 14 Mar 2018