Locked-in profits

Going by the oversubscription for IOI Corp Bhd's exchangeable bonds, demand for palm oil stocks continues to be very strong.

IOI announced last week that its exchangeable bonds, also known as convertible bonds (CBs), were snapped up within 1½ hours after the book opened. The offering attracted bids for US$3bil (RM9.8bil), an oversubscription six times the planned issue size of US$500mil (RM1.6bil).

As a result of the strong demand from global investors, the issue size was expanded to US$600mil (RM1.9bil), the company said.

The demand was huge in spite of the exchange price of RM11.00, which was a premium of 30.2% over IOI Corp's share price of RM8.45 on Jan 8.

The investors obviously believe IOI Corp shares price would grow to well as RM11.00 each, which would be their only payoff because the yield-to-maturity is just 1.25%.

For IOI Corp, it has raised a lot of cash at a very low cost, which could be used for a very sizeable acquisition.

Source here