Parent firm gives IOI Properties the edge

Tuesday, June 23, 2009

Artist’s impression of Pinnacle Collection. Datuk Lee Yeow Chor (inset) says the company is closely monitoring the Singapore property market to ensure the timely launch of the projects

IOI Properties Bhd will be leveraging on the financial strength of its parent, IOI Corp Bhd, to build a greater presence in the Klang Valley and Singapore property markets.

Since being taken private in April, the 95.33% subsidiary of IOI Corp has greater liberty to plan and decide on the direction and projects it wants to undertake.

IOI Corp group executive director Datuk Lee Yeow Chor said although the level of activities would not change much from what the company had done previously, it was in a better position to leverage on the group’s financial strength to facilitate funding requirements for land acquisitions and move projects ahead.

According to Lee, property is all about holding power and having the financial strength to hold out and mitigate against the prevailing challenging market conditions, including slow sales; are important for property companies.

Despite the severe market crunch in Singapore since February last year, IOI Properties proceeded with the construction of its Seascape Collection residences on Sentosa Cove. The construction of the project has reached 40% to-date.

The 1.44-ha Seascape project is a 50:50 joint venture between IOI Properties and its Singapore partner, Ho Bee Investment Ltd.

It comprises two eight-storey condominium blocks of 151 units of various sizes, tentatively priced from S$2,500 to S$2,800 per sq ft.

IOI’s second project in Singapore, the Pinnacle Collection – which is 65%-owned by IOI Properties and 35% by Ho Bee – will be undertaken by Pinnacle (Sentosa) Pte Ltd. The 2.12-ha site was tendered for S$1.1bil.

The 99-year leasehold land is the final piece of condominium land to be launched by Sentosa Cove and has a maximum permissible gross plot ratio of 2.6.

The site will have seven 18-storey blocks and one 20-storey block of luxurious condominiums. It is one of the two condominium parcels flanking the entrance of the marina leading into Sentosa Cove.

Lee said the launch of The Pinnacle would depend on the take-up for the Seascape residences.

IOI has plans for a third project in the city state, comprising medium to medium high-end residences on a 1.44-ha site near Novena Square and Orchard Road.

He said the company was closely monitoring the Singapore property market to ensure the timely launch of the projects to optimise their value.

“The completion of the two integrated resorts in Singapore later this year will be the catalyst for further economic growth and market upturn in the city state,” Lee said.

In the last two months, the market for medium to mid-high end property in Singapore had shown encouraging signs of an upturn, he added.

Things are also looking up for the Klang Valley property market and demand is expected to recover by year-end.

For the financial year ending June 30, 2010 (FY10), project launches worth RM580mil have been lined up in the Klang Valley, including in Bandar Puteri, Bandar Puchong Jaya and IOI Resort.

A new greenfield development, Sierra Puteri, a mixed housing development on 194ha in the Seri Kembangan-Cyberjaya area, is also in the pipeline for launch in the first quarter of next year. There will also be a 22-ha commercial precinct in the RM2bil development. Lee expects the company’s property sales to bounce back from RM630mil recorded last year to RM650mil next year. This year, it expects to turn in sales of RM610mil.

“We will also be placing more focus on investment properties. For FY10, we expect more than 15% of the company’s earnings to come from property investment and the balance from property development,” he said.

Last year, income from property investment contributed 10% to the bottomline of IOI Properties and about 22% to 25% of IOI Corp’s earnings.

General manager for group operations Lee Yoke Har said besides leveraging on the good location of the company’s land bank and strong branding, it also emphasised on good community relations and programmes to promote wholesome living and safe communities in all its townships.

It set up a dedicated community website, Myioi.com, in 2000 that has become a popular communication tool for residents of its projects.

Other initiatives include the IOI Privilege card, which is a discount card offered to residents when they patronise any of the participating outlets in the townships.

“The next project to be rolled out will be free WiFi within our townships and ‘intercom connection’ for residents via the 015 IP phone,” she added.

By The Star (by Angie NG) (Posted on 22 June 2009)
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Malaysia IOI says worst is over for palm oil planters

July 2, 2009.

IOI Corp, Malaysia’s No 2 planter, said on Thursday that the worst was over for the plantation sector as palm oil prices have recovered from last year’s slump although M&A activity would be muted.

Earnings of Malaysian palm oil producers plunged in the first quarter as crude palm oil prices more than halved from a year ago.

IOI, valued at $8.37 billion, saw net profit nearly wiped out during January-March due to weak crude palm oil prices and large foreign translation losses on its U.S. dollar borrowings.

Sime Darby , Malaysia’s top planter, reported a 85 percent drop in net profit while third-ranked Kuala Lumpur Kepong saw net profit down 52 percent in the same period. “It’s quite obvious it will be better. The industry including ourselves expects to see much better fourth quarter (April-June) operating results,” IOI Executive Director Lee Yeow Chor told Reuters at the company’s headquarters in the administrative capital of Putrajaya.

Malaysia is the world’s second-largest palm oil producer after Indonesia.

Crude palm oil prices hit a record 4,486 ringgit a tonne in March 2008 before collapsing at the height of the global financial meltdown and triggering speculation that distressed plantation firms starting out would sell.

But Lee said the opportunities for merger and acquisition in the sector are hard to find now as the palm oil price recovery helped smaller firms hold out for better deals.

“Because the sharp price drop has not really been for a long time, the pressures on them (smaller planters), in terms of cashflow or repayment of bank borrowings is not so great.”

BRIGTHER OUTLOOK

IOI, which owns oil palm estates in Malaysia and Indonesia, saw net profit for the third-quarter to March plunge 94 percent to 37.36 million ringgit from a year ago on an unrealised forex translation loss of 232.4 million ringgit. [ID:nKLR496786]

The sharp drop in third-quarter earnings was due mainly to “a lot of translation adjustments” on its U.S. dollar debt, said Lee, adding that IOI expects the forex losses to reverse in the upcoming quarterly results.

“For fourth quarter with the weakening of the U.S. dollar, from end-March of around 3.63 ringgit, we expect to have some gains in currency translation for U.S. dollar borrowings,” said Lee.

“We borrow U.S. dollars, because it corresponds with our palm oil revenue, so that is a natural hedge between our borrowings and receipt of revenue,” he added.

BANKING ON ASIAN DEMAND

Palm oil prices have now recovered more than 60 percent from a low of 1,331 ringgit ($378.8) per tonne in October on surging Asian demand as well as tight Malaysian palm oil stock levels in the first few months of 2009.

“We have always thought that the low price level in the first quarter of this year was not a sustainable level to begin with. We have always expected the price to move up,” said Lee.

“The major consuming countries, China and India, their economies have not been that badly affected by the prevailing global downturn,” he said.

Lee said Malaysian palm oil production should pick up in the second half of the year due to the seasonal uptick in output as yield stress fades. He pegged June palm oil stocks at 1.5 million tonnes, an increase of 9.5 percent from a month earlier.

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Backers Don't Buy 'Friendly' Palm Oil

July 15, 2009

KUALA LUMPUR, Malaysia -- European consumer groups and nongovernmental organizations have said they want environmentally friendly palm oil. Malaysian producers of palm oil that have made the switch are discovering that it is still a hard sell.

The price premium for palm oil certified as produced through sustainable plantation practices has been shrinking since the first eco-friendly palm oil was shipped to European markets last November, and producers say it may need to disappear if they are to regain business in the key European Union market.

Producers say the difficulty in selling higher-priced sustainable palm oils highlights the double standards of those who criticize the industry but buy the cheaper, uncertified oil that they say is harming the environment.

"We [plantation firms] have complied with the strictest criteria on sustainability. The multinational companies, which also are end-users of palm oil, should not preach wine and drink water," said Carl Bek-Nielsen, vice chairman of United Plantations Bhd., the first Malaysian company certified as a sustainable producer.

Palm oil is a vegetable oil used in products ranging from margarine and cosmetics to feedstock for biofuel. It competes with soybean oil. Premiums for sustainable palm oil have shrunk to between $10 and $15 a ton, from $45 to $50 a ton before the global financial crisis took a toll on European economies late last year and demand waned, said Roy Lim, group plantations director of Kuala Lumpur Kepong Bhd., Malaysia's third-largest listed palm-oil producer by stock-market value. Noncertified palm oil currently sells for about $565 a ton, he said, already down more than 50% from last year's peak.

Consumer-goods companies like Unilever PLC, Nestlé SA and Kraft Foods Inc. repeatedly have said they would seek to buy palm oil produced with minimal harm to the environment. All support the goals and efforts of the Roundtable for Sustainable Palm Oil, formed by World Wildlife Fund and Unilever, which is adopting stringent and sustainable practices for palm-oil cultivation.

Although the combined annual production capacity of RSPO-certified producers in Malaysia, Indonesia and Papua New Guinea exceeded 1.57 million tons of certified palm oil and palm-kernel oil at the end of May, only 15,000 tons of certified oil has been sold since certification started late last year.

"At the moment, demand for certified palm oil is only 1% of the [produced] volume, so this has been disappointing for the growers and we feel the food companies should keep their end of the promise," said Lee Yeow Chor, executive director of Malaysia's second-largest palm oil producer, IOI Corp. Bhd.

IOI, KLK and United Plantations say they are committed to producing sustainable palm oil, even if the price premium disappears.

Nestlé remains committed to sustainable sourcing and only buys products derived from crude palm oil from reputable manufacturers, spokeswoman Nina Backes said.

Kraft spokesman Richard D. Buino said that while the company supports the RSPO's efforts, "it is clear more work is needed to consolidate standards, enforce principles, verify traceability along the supply chain and ensure competitive pricing to bring certified palm oil to market. We're monitoring the RSPO process and actively engaging our suppliers to monitor their certification efforts to find viable options for sourcing sustainable palm oil."

Neither Nestlé nor Kraft directly addressed purchases of Malaysia's certified palm oil.

Officials from Unilever, which purchases between 1.3 million and 1.5 million tons of palm oil annually, couldn't be reached for comments. The Anglo-Dutch consumer-goods giant announced in 2008 that it was committed to completely switch to certified palm oil by 2015.

Write to Shie-Lynn Lim at shie-lynn.lim@dowjones.com

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#3 Lee Shin Cheng

Net Worth $3.2 billion
Age 70
Marital Status Married, 6 children
Source palm oil

Former plantation field supervisor heads ioi Group, one of world's leading operators of palm oil plantations, refineries. Took its IOI Properties private in April. IOI's stock has doubled since November but still down a third since last year amid falling commodity prices.

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