Tuesday, March 24, 2009

Privatisation Debate Continues


More on IOI Corp's intention to privatise IOI Properties. Like some would say, its a business transaction, hence the former would only do it when it makes business sense. Sometimes it does not pay to always try to look for sinister evil plans behind all corporate strategies. If you go through the recent history as listed by Moolah below, the privatisation has always been out there. Its only a matter of timing. At the high, there were rumours of a privatisation for IOI Prop at RM15, that would have cost IOI Corp a fair bundle compared to now.

Investors cannot see things all the time from the people holding the shares now. For every transaction, there is a buyer and a seller. Say a trade was done at RM4.00 many months back, there was a buyer at RM4 and a seller of IOI Prop at RM4 done. Now the privatisation at two fifty something may seem cheap to the current shareholder who bought at RM4 - one can argue that the minority shareholder would have bought for the longer term and now may be forced to liquidate at a loss. But the guy who sold at RM4 would be happy now because he sold out earlier. If every transaction has two sides, one will always be happier than the other.


As for what is fair pricing, if IOI Corp pays too high, e.g. RM3.30, then it will be at the expense of IOI Corp's minority shareholders. One can even say IOI Corp's management is "bailing out" themselves because they own 79% in IOI Prop. Its a devil's advocate situation - if you want to look at the transaction cynically, it will always present a bad side.
In my view, the deal could have been priced about 5% higher. In my view, the deal is to help out IOI Prop as it will see substantial diminution in some of its investments, and will have some trouble raising funds in the future. No listed counter promises to stay listed forever. You don't like it, then don't sell to IOI Corp and see what will happen to IOI Prop over the next 12 months. I bet another rights issue will come, but this time very cheap one at RM1.50!!!

http://www.whereiszemoola.blogspot.com/

I peeped and I saw Dali talking about IOI Properties: Judging The VTO Of IOI Properties :p3

Jan 10th 2008: IOI Prop unit buys Singapore land for condo project

  • IOI Properties (S) Pte Ltd (IOIP), a wholly owned unit of IOI Properties Bhd, together with its joint venture partner, Ho Bee Investment Ltd, have successfully tendered for a 5.3-acre land parcel in Singapore’s Sentosa Cove, for S$1.097bil cash.

  • Going by the existing market price of between S$2,000 and S$3,000 per sq ft for recent condominium projects in Singapore, the Pinnacle Collection project can expect to generate a gross development value of close to S$2bil while the Seaview project will gross around S$1.25bil.

  • “Our association with luxury landmark developments in Sentosa Cove will enhance the IOI Properties brand name and reputation as a luxury quality homes developer not only in Malaysia and Singapore, but also in the larger South-East Asia region,” it added.

Jan 15th 2008: No plans to take property unit private: IOI Corp

  • SHARES of IOI Properties Bhd rose as much as 8.3 per cent or RM1.10 yesterday, fuelled by a privatisation rumour which was promptly denied by the company. There was speculation that IOI Corp Bhd, which holds about 70 per cent of IOI Properties, could take its subsidiary private, offering RM15 a share. At that price, it would cost IOI Corp about RM1.5 billion to buy the remaining shares it does not own."It's not true. There's no such thing going on in the company," said a company spokesperson when contacted.

Feb 12th 2008: IOI Properties set to unveil project in IDR

  • He said the project, on a 101.171ha, would have 2,000 residential and commercial units. Of the land, 20.2ha will be allocated for light industrial buildings. “It is timely for us to have a project in the Johor Baru district after our success in the ongoing Bandar Putra Kulai project,’’ Heng told StarBiz in a telephone interview. He said the location of Taman Kempas Utama in the Kempas-Tebrau growth corridor within the Iskandar Development Region (IDR) augur well for the company. Heng said the project was easily accessible from the NSE after the Skudai toll plaza, Jalan Kempas Lama and Jalan Senai-Seelong.
    He said the Kempas-Tebrau corridor was currently the hottest spot for property development in south Johor with more than 10 ongoing projects. Heng said the outlook for the property sector in south Johor was promising and some of the biggest names in housing development were launching projects there.
    He said IOI Properties was still working on the gross development value of the project, adding that it would take between eight and 10 years to develop the scheme.

26th Feb 2008: IOI Properties announced a rights issue ( IOI PROPERTIES BERHAD ("IOI PROP" OR "COMPANY") (I) PROPOSED SHARE SPLIT; (II) PROPOSED AMENDMENTS TO THE MEMORANDUM AND ARTICLES OF ASSOCIATION OF THE COMPANY; AND (III) PROPOSED RIGHTS ISSUE (COLLECTIVELY REFERRED TO AS THE "PROPOSALS") )

27th Feb 2008: IOI Properties to raise RM932m

  • PROPERTY developer IOI Properties Bhd plans to raise up to RM932 million from a rights issue to part-fund its projects in Singapore. It will also use part of the money to refinance existing debt, it said in a statement to Bursa Malaysia yesterday. IOI Properties has total debt of RM225 million.

    In January, the company, a unit of IOI Corp Bhd, won a bid with its partner to buy land on the resort island of Sentosa, Singapore, for S$1.097 billion (RM2.5 billion). This followed its first successful bid in March last year.
    Then, it won a tender to buy land on the island for RM1.1 billion.

    "IOI Corp, being the controlling shareholder of IOI Properties, will give its irrevocable and unconditional written undertakings to subscribe in full for its entitlement," IOI Properties said.

    IOI Corp holds 71.15 per cent of IOI Properties as at February 15, 2008.
    Before the rights issue, IOI Properties will split its shares into two, to boost trading in the stock as it becomes more affordable. As at February 15 2008, IOI Properties has a paid-up capital of RM333.52 million comprising the same number of shares. After the split, the number of shares will double to 667 million. Then, it will offer investors one new rights share for every four existing shares held after the split. The rights are priced at RM5.50 apiece. Shares of IOI Properties closed at RM12.70 yesterday down 40 sen from Monday's close.

5th May 2008: IOI Properties in for steady flow of earnings

15th May 2008: Quarterly rpt on consolidated results for the financial period ended 31/3/2008

IOI Properties made 70.741 million for the quarter.

6th June 2008: Company was still active with their buybacks. Here is one such announcement Notice of Shares Buy Back - Immediate Announcement

18th June 2008: Rights Issue and Important Relevant Dates for Renounceable Rights were announced by IOI Properties

2nd July 2008: IOI Properties heading towards privatisation?

  • IOI Properties heading towards privatisation?

    By Francis Fernandez Published: 2008/07/02

    IOI Corp can choose to privatise IOI Properties at a minimum price of RM4.85, says a research analyst with Credit Suisse


    IOI Corp Bhd, Malaysia's second most valuable firm, may take its property arm private, make fresh purchases or give its convertible bondholders treasury shares, three foreign investment firms speculate.

    Credit Suisse said in a report that there was a high chance of IOI Corp privatising IOI Properties Bhd (IOI Prop) if the latter's rights issue was grossly undersubscribed.


    In February, IOI Prop said it planned to raise as much as RM932 million, with its parent underwriting the issue.

    "As IOI Corp is underwriting the deal, then IOI Corp may end up with more than 75 per cent of IOI Prop. Although there are other options, IOI Corp can choose to privatise IOI Prop at this juncture, at a minimum price of RM4.85," wrote Tan Ting Min, a research analyst.

    Doing so would cost its parent some RM1.1 billion and improve its earnings next year by as much as four per cent, the research house said. In the year to June 30 2007, IOI Corp made a net income of RM1.48 billion.

    Over the past eight years, IOI Corp has pumped in more than RM3 billion to take IOI Oleochemical Bhd private, buy the India-based Aditya Birla's edible oil and oleochemical units in Johor, and acquire 100 per cent of Loders Croklaan BV and its related businesses in the US, Canada and Egypt from the Unilever group. The purchases have made IOI Corp the world's largest oleochemical group.

    Merrill Lynch expects the group to use its treasury shares, stocks bought under buyback exercises, to enhance value. In the first half of this year, IOI Corp paid some RM1.2 billion to buy its own shares.

    "The highest form of value-enhancement would be to cancel the shares bought back, or it could issue shares to the CB (convertible bond) holders via the shares bought back, thus mitigating any dilution arising from the conversion," Merrill Lynch's Andrew Lee wrote in a report.

    IOI Corp currently has a US$360 million (RM1.2 billion) convertible bond due in 2011, with a conversion price of RM4.70 a share, and a US$600 million (RM2 billion) convertible bond due in 2013, with a conversion price of RM11 a share.

24th July 20o8: Announcement on Bursa

  • Aseambankers Malaysia Berhad (“Aseambankers”), on behalf of the Board of Directors of IOI Prop (“Board”), is pleased to announce that as at the close of acceptance of and payment for the Rights Shares under the Rights Issue at 5.00 p.m. on 21 July 2008, the total acceptances and excess applications received were for 170,866,635 Rights Shares over the 162,537,250 Rights Shares available for subscription under the Rights Issue, which represents an oversubscription of 8,329,385 Rights Shares or approximately 5.12%.

18th August 2008: Quarterly rpt on consolidated results for the financial period ended 30/6/2008

IOI Properties made 148.5 million for the quarter.

7th November 2008: Quarterly rpt on consolidated results for the financial period ended 30/9/2008

  • IOI Properties 1Q Net Profit Dn 31% On Weak Demand,High Costs

    KUALA LUMPUR (Dow Jones)--IOI Properties Bhd (1635.KU) said Friday first-quarter net profit fell 31% on year due to weaker demand and higher construction costs.

    Net profit in the three months ended Sept. 30 declined to MYR55.5 million from MYR80.1 million a year earlier, while revenue slipped to MYR158.8 million from MYR205.5 million.

    "The decline is attributable to the softer property market and the margin reduction due to higher construction costs during the quarter," IOI Properties said in the notes accompanying its results.

    Property development accounts for the bulk of the group's income, although it receives contributions from plantations, property investments and other operations. The company expects its full-year operating performance to be lower than the previous year as the property market is expected to remain soft until the second half of the fiscal year.

    Overall performance should remain "satisfactory" in the current market environment as lower building material prices will enable it to accelerate construction activities and achieve better margins when the property market recovers, the company said. It added that properties in the Puchong township are still seeing steady demand.

5th Feb 2009: IOI Corp to buy out property arm

  • By Chong Pooi Koon Published: 2009/02/05

    Planter IOI Corp Bhd (1961) plans to pay RM506 million, or RM2.60 a share in a cash-and-share deal to buy out IOI Properties Bhd before taking it private, the company said yesterday.....
p/s photos: Kou Shibasaki

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