Saturday, 11 May 2013

The return of IOI Properties

The following article is from The Star: "The return of IOI Properties".

Some excerpts:
  • “People associate Lee Shin Cheng as a planter. They have forgotten that he is an equally good property developer as seen from IOI Properties' track record before its delisting.
  • “IOI is the sort of company that big money and institutions will be attracted to,” says one fund manager who used to invest in IOI Properties.
  • Prior to IOI Properties' delisting in 2009, it was the biggest property company in terms of profitability.
  • Even now under parent IOI Corp, IOI Properties is the second largest company in terms of operating profitability after SP Setia Bhd. As of its financial year ended June 30, 2012, IOI Properties recorded an operating profit of RM506.3mil.
  • “The listing of IOI Properties will certainly be interesting. It is one of the biggest property companies in Malaysia and now has a track record in China. As we all know, the China market is never easy to penetrate,” said Etiqa Insurance & Takaful Bhd's Head of Research Chris Eng.

This all sounds very good indeed, surely Malaysia would be proud to have this company listed on Bursa?

But this very same company was actually listed on the very same Bursa, only four years ago. And it was taken private at an extremely low valuation, in the midst of the global crisis.

"Where is Ze Moola" has written many times about this issue.

This is what Gerald Ambrose, fund manager of highly regarded Aberdeen Asset Management remarks:
  • ...IOI Properties was an excellent property developer while IOI Corp Bhd was an outstanding upstream and downstream oil palm player.
  • “For sure, the company has got the track record and excellent management skills. At Aberdeen, we are long term holders with an investment horizon of 8 to 10 years. We used to be a shareholder of IOI Properties before its privatisation in 2009.
  • We were very disappointed when we had to sell the stock because we considered the privatisation price of 0.66 times to its net tangible asset as greatly undervalued. We hope that this will not happen again,”

Here is the (rather shocking) share graph from Ze Moola's website:

Bursa Malaysia's stand in this matter:

At the AGM, a shareholder also asked what Bursa's role was following an  increasing trend of listed companies being taken private, wiping billions off the exchange. And after several years, these companies got relisted.

"When [privatisation and relisting of the same companies] happens, I think someone is making money but not us shareholders," remarked the shareholder.

To that question, Tajuddin responded: "Bursa has engaged with its stakeholders on this. The conclusion was that these corporate exercises were business decisions .

That sounds like a very unsatisfactory answer. Who were those "stakeholders", where they major shareholders, brokers, lawyers, financial advisers and the like, the usual mix of insiders who only profit from these exercises? Or did they also include retail investors and fund managers like Aberdeen, who are on the receiving end of the stick?

Bursa Malaysia should urgently look into the unfair advantage that majority shareholders have, using the "listing-delisting-relisting game" to book large profits at the expense of the minority investors. It is long overdue. To simply conclude that these are "business decisions" will not do.

Bursa needs to come with an answer on Ambrose's statement "We hope this will not happen again" with which we very much agree, not only regarding IOI Properties, but any listed company on Bursa.


  1. Can you comment on the recent general offer for TEBRAU at the meagre price of 76 sen and the current price it is enjoying now? It went up to as high as 1.56 post GO. How indeed was the offer price arrived at and with what 'hidden intention' was the general offer exercise conducted?

  2. Thanks for your comment, will have a look, please give me some time.

  3. Hi Anonymous, the offer was quite some time ago. The price of RM 0.76 looks indeed rather stingy. Revised Net Assets was RM 0.82, but that was quite some time ago in which all things (share market, property and land) have gone up.

    The good thing is that the majority shareholder wanted to keep the listing status and also would not mandatory acquire shares, so minority shareholders are not pressured.

    The earnings of TT have not been great the last 5 years, so the value is towards the future earnings from the land held. That is very hard for me to judge. It depends possible permits to build, strategic location, etc.

    Anyhow, looks like pretty good news, minority shareholders were not forced to accept the general offer, and those that held out are looking at a nice profit.