IOI Properties announced a successful bid to buy Singapore's Marina View leasehold land measuring c.84k sq ft (0.78 hectares) for a tender consideration of SGD1.5bn (approximately RM4.68bn). The land is highly accessible and could reap strong demand given its attractive location at the Singapore’s major financial and business district. Our proforma calculation indicated that gearing will increase to 0.71x (from 0.47x as of FY21). Maintain our forecast pending more details of the developments. We maintain our BUY recommendation with an unchanged TP of RM1.79 based on discount of 60% to a RNAV of RM4.48.

NEWSBREAK

IOI Properties announced a successful bid to buy Singapore's Marina View leasehold land measuring c.84k sq ft (0.78 hectares) for a tender consideration of SGD1.5bn (approximately RM4.68bn) from the Singapore’s Urban Redevelopment Authority (URA). Details of the proposed development to be undertaken on the land have yet to be finalised and hence, no GDV has been disclosed. Based on information published by the URA, the land with a gross plot ratio of 13x is estimated to yield more than 1.1m sq ft of space for 905 private residential units, 540 hotel rooms, and 21.5k sq ft gross floor area of commercial space. The land is located in Marina View within the Marina Bay area, which is Singapore’s major financial and business district. The land is also well connected with the existing Marina Bay and Downtown MRT stations and the upcoming Shenton Way MRT station on the Thomson-East Coast Line. The Marina Bay MRT station serves as an interchange for 3 lines, i.e. the existing Circle Line, North-South Line and the upcoming Thomson-East Coast Line, hence providing the land with a convenient access to the island-wide rail network.

HLIB’S VIEW

Positive. We are positive with the acquisition as it represents an attractive and viable opportunity for the group to venture into a mixed-use development in Marina Bay area, which is Singapore’s prime business and financial precinct with good accessibility of transportation. For comparison with the group’s current development in Marina Bay, Singapore, the acquisition of Central Boulevard (1.1 hectares land) has a GDV value of SGD3.5bn (or RM11bn) with cost-to-GDV of c.73%. Assuming a similar margin, we project that the land will have an indicative GDV of SGD2.1bn (RM6.4bn), an increase of 10% to the group’s remaining GDV.

Proforma financial impact. The acquisition price translated into SGD1,378 psf per plot ratio, which we deem as fair. For comparison, the recent Sunway-Hoi Hup JV land acquisition indicated an implied land cost of SGD1,355 psf of plot ratio, where the land is situated c.10km from Marina Bay. In term of gearing, our proforma calculation indicated that net gearing will increase to 0.71x (from 0.47x as of FY21).

Forecast. Maintain our forecast pending more details of the developments. We maintain our BUY recommendation with an unchanged TP of RM1.79 based on discount of 60% to a RNAV of RM4.48. We like IOIPG given its ability to heavily outperform its peers over the past quarters during the ongoing pandemic alongside its ability to sustain strong net margins of 20-30%. We see value in the stock as it trades at a P/B valuation of 0.3x (below -2SD of its 5-year mean) despite generating consistent earnings during the ongoing pandemic.

Source: Hong Leong Investment Bank Research - 30 Sept 2021